Morning Commentary: Immunocore convertible notes in demand, jump on trading debut

By Abigail W. Adams

Portland, Me., Jan. 31 – The convertibles secondary space saw an active start to the day on Wednesday as the first new paper of the week made its aftermarket debut.

Immunocore Holdings plc priced an upsized $350 million of six-year convertible notes after the market close on Tuesday.

The wall-crossed offering was heavily oversubscribed with the strong demand seen during book building following the notes into the secondary space.

The new paper dominated activity early Wednesday and made meteoric gains on an outright and dollar-neutral basis.

The new paper comes on Fed day with all eyes on the Federal Open Market Committee’s afternoon announcement and chair Jerome Powell’s press conference.

The market is widely expecting another rate pause but will be looking to the announcement to resolve ongoing debates about when rate cuts are set to begin.

The demand for recent issues and their strong performance in the secondary space is a positive sign for the convertibles market.

However, issuance has paled in comparison to the deluge of junk and high-grade capital raises over the past month.

While there is expected to be an uptick of issuance as earnings season blackouts end, the pending rate cuts may be a drag on issuance, a source said.

Equity indexes were mixed heading into the Fed announcement with disappointing earnings from the tech sector dragging down markets.

The Dow Jones industrial average was up 19 points, or 0.06%, the S&P 500 index was down 0.89%, the Nasdaq Composite index was down 1.6% and the Russell 2000 index was down 0.35% shortly before 11 a.m. ET.

Immunocore in demand

Immunocore priced an upsized $350 million of six-year convertible notes after the market close on Tuesday at par with a coupon of 2.5% and an initial conversion premium of 40%.

The wall-crossed offering was heavily oversubscribed with pricing coming at the rich end of talk for a coupon of 2.5% to 3% and through the rich end of initial talk for a conversion premium of 30% to 35%, according to a market source.

The convertibles were strong out of the gate and continued to shoot higher as the session progressed.

The notes were marked at 105.5 versus a stock price of $70 about one hour after the opening bell.

They continued to climb and were seen trading at 106.625 a short time later.

The notes expanded 3 to 3.5 points dollar-neutral, sources said.

The new paper dominated activity in the secondary space with $50 million in reported volume, almost one-half of the total volume in the space.

Immunocore’s stock was trading at $71.45, an increase of 5.63%, shortly before 11 a.m. ET.

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