MicroStrategy’s second convertible notes offering expands on debut; Coinbase softens

By Abigail W. Adams

Portland, Me., March 15 – The convertibles primary market capped a crypto-focused week with MicroStrategy Inc. pricing its second convertible notes offering in two weeks.

The opportunistic capital raise came on the heels of MicroStrategy’s highly successful $800 million issue of 0.625% convertible notes due 2030 that priced on March 5.

It also trailed Coinbase Global Inc.’s heavily oversubscribed $1.1 billion offering of 0.25% convertible notes due 2030 that priced on Wednesday.

MicroStrategy’s latest offering played to solid demand during book building although the exuberance seen in the previous deal seemed to fade alongside Bitcoin’s rally.

The new paper hit the secondary space on a mixed day for equities as broader markets remain focused on the Fed and rate cuts.

The Dow Jones industrial average closed Friday down 191 points, or 0.49%, the S&P 500 index closed down 0.65%, the Nasdaq Composite index closed down 0.96% and the Russell 2000 index closed up 0.33%.

Bitcoin continued to retreat from its new all-time high of $73,750 with the cryptocurrency trading at $67,935, a decrease of 3.11%, shortly after the close of U.S. equity markets.

There was $145 million in reported convertible bond trading volume about one hour into the session and $494 million in the late afternoon with MicroStrategy’s new and recently priced convertible notes accounting for more than one-quarter of the total activity in the space.

MicroStrategy’s new convertible notes were putting in a strong performance with the notes trading up on an outright and dollar-neutral basis while the 0.625% convertible notes due 2030 traded largely in line with stock.

Coinbase’s new 0.25% convertible notes due 2030 also continued to see heavy volume with the notes improved outright but weaker on hedge.

Outside of crypto names, the secondary space was largely quiet although topical and earnings-related news sparked outsized moves in some outstanding issues.

Cardlytics Inc.’s 1% convertible notes due 2025 exploded to the upside after reporting earnings.

MicroStrategy solid

MicroStrategy priced an upsized $525 million of seven-year convertible notes after the market close on Thursday at par at the cheap end of talk with a coupon of 0.875% and an initial conversion premium of 40%.

The greenshoe was also upsized to $78.75 million.

The initial size of the offering was $500 million with a greenshoe of $75 million.

The new paper saw a strong start in the aftermarket, although it did not replicate the explosive gains of the 0.625% notes.

The new paper was holding above par with stock off as much as 5% early in the session.

They were trading at 100.625 versus a stock price of $1,614 early in the session.

The notes continued to gain steam as stock eliminated its losses and popped back into positive territory.

The 0.875% notes were trading at 101.875 versus a stock price of $1,685.43 in the late afternoon.

The notes expanded 1.5 points to 2 points dollar-neutral, a source said.

There was $92 million in reported volume.

MicroStrategy’s 0.625% convertible notes also saw heavy volume with the notes moving largely in line with stock.

The convertibles were trading at 130 versus a stock price of $1,636 early in the session and climbed to 135 versus a stock price of $1,690 in the late afternoon.

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

There was $32 million in reported volume.

MicroStrategy’s stock was down as much as 5% in early trade but eliminated losses to set a new high in intraday trade.

“These stock moves are insane,” a source said.

Stock traded to a low of $1,570 and a new 52-week high of $1,815 before closing at $1,782.36, an increase of 6.29%.

Coinbase Day 2

Coinbase’s new 0.25% convertible notes due 2030 improved on an outright basis but gave back some of their strong dollar-neutral gains their second-day in the secondary space.

The 0.25% notes opened the day unchanged but gained 0.5 point outright as stock popped into positive territory.

They were seen at 98.5 early in the session and were trading at 99.125 versus a stock price of $235.87 in the late afternoon.

The notes were down about 0.5 point dollar-neutral, a source said.

There was $23 million in reported volume.

Coinbase’s stock traded to a low of $222.83 and a high of $244.65 before closing at $242.36, up 3.72%.

Coinbase’s 0.25% notes were volatile on an outright basis on their aftermarket debut on Thursday with the notes trading as high as 103 but closing the day on a 98-handle.

However, the notes performed well on hedge and expanded 2 to 2.5 points dollar-neutral.

Cardlytics outperforms

While recently priced crypto-exposed names dominated the market’s focus on Friday, the largest movers pricewise belonged to some off-the-run names with Cardlytics’ 1% convertible notes due 2025 the major gainers of the session.

The 1% convertible notes jumped 15 points outright with stock up more than 70% after reporting earnings.

The 1% notes were trading at 83.5 versus a stock price of $12.10 in the late afternoon.

They expanded several points dollar-neutral, a source said.

There was $5 million in reported volume.

Cardlytics’ stock traded to a low of $11.80 before closing at the intraday high of $14.50, an increase of 77.15%.

While on the surface Cardlytics posted a large earnings miss, stock skyrocketed after the company posted positive EBITDA.

Cardlytics reported losses per share of 29 cents versus the earnings per share of 16 cents expected.

Revenue was largely in line with expectations at $89 million.

While a large bottom-line miss, the losses per share were largely the result of acquisitions with the company posting positive adjusted EBITDA of $4 million versus a $45 million loss the previous year.

Mentioned in this article:

Cardlytics Inc. Nasdaq: CDLX

Coinbase Global, Inc. Nasdaq: COIN

MicroStrategy Inc. Nasdaq: MSTR

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