Bloom Energy convertibles offering rounds out active week; Wayfair adds; Opendoor active

By Abigail W. Adams

Portland, Me., May 11 – The convertibles primary market stood poised to round out an active week with one last sizable offering.

Bloom Energy Corp. plans to price $500 million of five-year convertible notes after the market close on Thursday.

The deal looked cheap based on underwriters’ assumptions and was heard to be playing to solid demand with books closing in the early afternoon.

If priced at the current amount, the deal will lift the primary market’s weekly tally to $2.725 billion, marking the third busiest week of the year for new deal activity.

While rates and depressed stock prices have kept potential issuers at bay, companies are beginning to pull the trigger on deals, particularly when it comes to refinancing short-dated maturities, a source said.

Meanwhile, activity in the secondary space tempered on Thursday as activity surrounding new and recent issues subsided.

Markets remained indecisive on Thursday with Treasuries flat and equity indexes mixed with debt ceiling negotiations gridlocked.

The Dow Jones industrial average closed Thursday down 222 points, or 0.66%, the S&P 500 index closed down 0.17%, the Nasdaq Composite index closed up 0.18% and the Russell 2000 index finished off 0.84%.

There was $96 million in reported convertible bond trading volume one hour into the session and $487 million on the tape about one hour before the market close.

Wayfair Inc.’s new 3.5% convertible notes due 2028 popped back above par their second day in the secondary space with the notes adding to their strong dollar-neutral gains.

Opendoor Technologies Inc.’s 0.25% convertible notes due 2026 remained active following a company buyback with the notes continuing to trade at their buyback price.

Bloom Energy eyed

Bloom Energy plans to price $500 million of five-year convertible notes after the market close on Thursday 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 basis points over SOFR and a 42% vol.

The deal looked cheap based on underwriters’ assumptions with the offering modeling out to 3.375 points to 3.5 points cheap at the midpoint of talk, sources said.

The deal played to solid demand with books closing in the early afternoon.

Pricing was believed to be coming at the rich end of premium talk and at the mid to rich end of coupon talk, a source said.

The pricing seemed appropriate with Bloom Energy an interesting story, one source said.

And while the pricing did look good “if you believe the credit assumptions,” the disparity with the implied spread of its outstanding 2.5% convertible notes due 2025 was “head-scratching,” a source said.

Bloom Energy’s 2.5% notes have always traded extremely rich with the implied spread about 225 bps, a source said.

The green energy company has a high cash burn rate and negative cash flow; however, analysts are expecting the company to break even in the coming year.

And while the company is predicted to turn positive soon, its future is tied in with the government spending on a green economy with the debt-ceiling standoff an acute concern.

Bloom Energy’s 2.5% notes dived outright alongside stock following the launch of the new deal.

The notes fell to 108 from the low 120s, a source said.

However, they improved dollar-neutral on the move down.

Bloom Energy’s stock traded to a low of $12.52 and a high of $14.19 before closing at $13.23, a decrease of 12.96%.

Wayfair adds

Wayfair’s 3.5% convertible notes due 2028 remained active their second day in the secondary space with the notes adding to their already strong dollar-neutral gains.

The 3.5% notes popped back above par after dropping below on their aftermarket debut on Wednesday.

The notes were changing hands at 101 with stock in positive territory.

They improved dollar-neutral, a source said.

There was $26 million in reported volume.

Wayfair’s stock traded to a low of $35.53 and a high of $36.94 before closing at $36.44, up 1.62%.

Wayfair’s 3.5% convertible notes were volatile on an outright basis on Wednesday with the notes trading to a high of 102 and a low of 99.25.

However, they expanded 2 points dollar-neutral.

Opendoor active

Opendoor’s 0.25% convertible notes due 2026 remained active on Thursday following the company’s partial buyback of the notes.

The notes continued to trade around their buyback price, a source said.

They were wrapped around 60 with the yield about 16.625% in the late afternoon.

There was $8.5 million in reported volume.

Opendoor’s stock traded to a low of $2.09 and a high of $2.31 before closing flat at $2.10.

The 0.25% notes have made spectacular gains since the company reported earnings last Friday.

While the notes still have a massive premium, stock doubled post-earnings with the notes rising to 52 from their previous level of 47.

The notes were further lifted by a company buyback with Opendoor announcing it had repurchased $279 million in principal of the 0.25% notes for 60.5 on Wednesday, Prospect News reported.

Mentioned in this article:

Bloom Energy Corp. NYSE: BE

Opendoor Technologies Inc. Nasdaq: OPEN

Wayfair Inc. NYSE: W

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