Aphria convertibles tank on debut; Aqua America equity units dominate; Atlassian active

By Abigail W. Adams

Portland, Me., April 18 – After a lethargic week in the secondary market, there was an uptick in trading activity on Thursday with $900 million in two deals entering the space.

Aphria Inc. priced $300 million of five-year convertible notes and Aqua America, Inc. priced a downsized $600 million, or 12 million units, of $50-par three-year tangible equity units after the market close on Wednesday.

The new paper was in focus during Thursday’s session; however, the two offerings had very different performances.

Aphria priced cheap and tanked on its secondary market debut. Aqua America downsized the size of its deal but priced rich with the units expanding on their debut.

While the new paper was in focus, Atlassian Inc.’s 0.625% convertible notes due 2023 also saw some action although the notes were largely unchanged as stock tanked despite a third-quarter earnings beat.

Aphria down on debut

Aphria priced $300 million of five-year convertible notes after the market close on Wednesday at par with a coupon of 5.25% and an initial conversion premium of 20%.

The notes priced on the cheap end of talk for a coupon of 4.75% to 5.25% and an initial conversion premium of 20% to 25%, according to a market source.

While the notes were hovering at par early in Thursday’s session, they tanked heading in to the afternoon.

The notes traded down to 97 bid, 98 offered in the mid-afternoon, a market source said. “There was no bid for them out of the gate,” a market source said.

The convertible notes looked cheap at the midpoint of talk based on underwriters’ assumptions with sources pegging the notes between 2 and 4 points cheap.

However, there was no borrow on the stock.

Aphria is the latest cannabis company to price a dollar-denominated convertible notes offering. Some sources felt the company was overvalued, alongside the broader cannabis sector.

While up pre-market, Aphria stock traded down to close Thursday at $7.65, a decrease of 2.17%.

Aqua America in focus

Aqua America priced a downsized $600 million, or 12 million units, of $50-par three-year tangible equity units after the market close on Wednesday at the rich end of talk with a dividend of 6% and a threshold appreciation premium of 22.5%.

Price talk was for a dividend of 6% to 6.5% and a threshold appreciation price of 17.5% to 22.5%, according to a market source.

The units dominated activity in the secondary space. While off to a strong start early in the session, the units came in as the session progressed.

However, they were still up 0.25 point dollar-neutral in the mid-afternoon, a market source said.

The units traded as high as $52.75 but closed the day at $52.20.

Almost every unit to price was in play during Thursday’s session, the source said. More than 10.8 million units had changed hands by the market’s close.

The units priced concurrently with an upsized $1,124,999,992 common stock offering, which priced at $34.62 per share.

Aqua America stock closed Thursday at $37.15, an increase of 6.69%.

Atlassian active

While focus was on the new paper during Thursday’s session, Atlassian’s 0.625% convertible notes due 2023 saw some action with the notes dropping outright as stock tanked despite a third-quarter earnings beat.

The 0.625% convertible notes dropped about 9 points outright to close the day at 140, according to a market source.

However, the notes were largely moving in line dollar-neutral, another source said.

Atlassian stock traded to a high of $105.60 and a low of $100.25 before closing the day at $101.94, a decrease of 8.32%.

Stock tanked on Thursday despite beating analyst expectations on both the top and bottom line.

Atlassian reported earnings per share of 21 cents in the third quarter versus analyst expectations for 18 cents.

However, the software company disappointed on fourth-quarter guidance with projected earnings per share of 16 cents versus analyst expectations for 19 cents.

Mentioned in this article:

Aphria Inc. NYSE: APHA

Atlassian Inc. Nasdaq: TEAM

Aqua America, Inc. NYSE: WTR

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