Morning Commentary: iRhythm, MP Materials convertible offerings eyed; Super Micro surges

By Abigail W. Adams

Portland, Me., March 4 – The convertibles primary market was off and running early Monday with two deals on deck.

MP Materials Corp. plans to price $500 million of six-year convertible notes and iRhythm Technologies Inc. plans to price $450 million of long five-year convertible notes after the market close on Monday.

The deals looked cheap based on underwriters’ assumptions and were expected to do well with demand for new paper strong.

The new deal activity comes on a mixed open for equities with the Dow Jones industrial average down 104 points, or 0.27%, the S&P 500 index down 0.04%, the Nasdaq Composite index was down 0.15% and the Russell 2000 index up 0.20% shortly before 11 a.m. ET.

There was $67 million in reported volume about one hour into the session with topical news sparking large moves in outstanding issues.

Super Micro Computer Inc.’s 0% convertible notes due 2029 surged alongside stock on news the company would be added to the S&P 500 index.

iRhythm to tap market

In its debut appearance in the convertibles market, iRhythm plans to price $450 million of long five-year convertible notes after the market close on Monday with price talk for a coupon of 1.5% to 2% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 350 basis points over SOFR and a 42% vol.

Using those assumptions, the deal looked almost 4 points cheap at the midpoint of talk, a source said.

The deal was expected to do well with the offering representing new money entering the market.

MP Materials refinances

MP Materials plans to sell $500 million of six-year convertible notes after the market close on Monday with price talk for a coupon of 2.75% to 3.25% and an initial conversion premium of 37.5% to 42.5%.

The deal was heard to be in the market with assumptions of 500 bps over SOFR and a 45% vol.

Using those assumptions, the deal looked about 2.375 points cheap at the midpoint of talk, a source said.

The deal is coming as a refinancing with proceeds to be used to repurchase a portion of its 0.25% green convertible notes due 2026 in privately negotiated transactions.

While the deal is expected to do well with the refinancing driving demand, the rare earth miner is not without controversy with some investors wary of the sector.

MP Materials was formed from the acquisition of the California’s mountain pass mine with the previous owner, Molycorp, filing for bankruptcy in 2015.

Super Micro surges

Super Micro’s recently priced 0% convertible notes due 2029 surged in heavy volume early Monday on news the company’s stock would be added to the S&P 500 index.

The 0% convertible notes added almost 10 points outright with stock up almost 20%.

The notes were trading at 114 versus a stock price of $1,079 early in the session, according to a market source.

There was $11 million in reported volume.

Super Micro’s stock was trading at $1,112.31, an increase of 22.84%, shortly before 11 a.m. ET.

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