Morning Commentary: PureCycle prices green convertible notes; Insulet active early

By Abigail W. Adams

Portland, Me., Aug. 22 – The convertibles primary market opened the week with one overnight offering pricing post-close on Monday.

PureCycle Technologies Inc. priced an upsized $215 million of 7.25% seven-year green convertible notes with a discounted offer price of 90 and an initial conversion premium of 50%.

Pricing came in line with talk for a discounted offer price of 90, richer than talk for a fixed coupon of 7.5% and in line with talk for a fixed initial conversion premium of 50%, according to a market source.

The notes will be accretive for the first four years and reach par on Aug. 15, 2027.

The wall-crossed offering carried a unique structure with accretive convertible notes rare.

“We haven’t seen those in a while,” a source said.

The accretive structure lifted the yield on the notes to double digits for the first four years with the deal akin to a high-yield issuance from a company that would most likely be unable to obtain credit ratings, a source said.

The company currently produces no revenue with sources pegging the credit spread anywhere between 800 basis points to 1,200 bps over SOFR.

However, the borrow on the stock was decent and the deal looked attractive, a source said.

The offering was wall-crossed and already spoken for at the time of launch.

The new paper had not yet made its way to the tape early in the session with no trades posted, sources said.

However, there was an uptick of activity on Tuesday with equity markets again mixed.

The Dow Jones industrial average was down 107 points, or 0.31%, the S&P 500 index was up 0.03%, the Nasdaq Composite index was up 0.35% and the Russell 2000 index was down 0.21% shortly before 11 a.m. ET.

There was $109 million on the tape about one hour into the session with market players positioning themselves as they prepare for a slowdown in activity over the next two weeks.

Insulet Corp.’s 0.375% convertible notes due 2026 were in focus early Tuesday with the notes lower alongside stock.

The notes were down about 0.5 point outright with stock off about 1%.

They were changing hands at 106.25 versus a stock price of $198.95 early in the session.

The notes were moving in line dollar-neutral, a source said.

There was $15 million in reported volume.

After bouncing at the open, Insulet’s stock traded down to $193.82, a decrease of 1.37%, shortly before 11 a.m. ET.

Analysts are at odds over the insulin management company with a Baird analyst recently downgrading the company from “overweight” to “neutral” and slashing its price target to $219 from $320 while a Citi analyst upgraded the stock to “buy” from “neutral.”

While Citi analysts upgraded the stock, the price target was also cut to $265 from $273.

Insulet’s stock fell 4% on Monday following the analysts’ reports.

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