Top Axes:
Trading Recap:
So far this week, the StoneX Converts Desk has traded the following: AAL 6 ½ 07/01/25, AXON 0 ½ 12/15/27, CRNC 1 ½ 07/01/28, FSLY 0 03/15/26, LCID 1 ¼ 12/15/26, LIF 0 06/01/30, GRPN 6 ¼ 03/15/27 , LCID 1 ¼ 12/15/26, MCHP 0 ¾ 06/01/30, PMT 8 ½ 06/01/29, and WOLF 1 ¾ 05/01/26.
CyberArk returned to the convertible market, announcing a $750M offering of convertible senior notes due 2030. Initial price talk was 200 implied, 38 vol, with final pricing expected today. AKAM 0 ¼ 05/15/33 was active on swap, with bonds now trading up 5/8 pts $ ntrl (non rho adjusted) from 5-22. MPUS common stock rallied again, up 11.73% and up over 30.95% in the last five days. We remain active in both shorter and longer dated MPUS 26 and MPUS 30. Lastly, activity in REITs convertible remains steady following the NAREIT conference this week. For an updated markets and/or analysis of the sector, reach out to the desk.
Fastly, Inc. (FSLY)
- Today we traded a block of FSLY 0 03/15/26 from 95.6875 to 95.72 which are yields of 5.74% to 5.7%
- FSLY 7 ¾ 06/01/28 are v 7.34 102-103
- Deal came to market in December 2024 v 9.87 at 100. If we nuke 100 v 9.87 45delta to 7.34 that is 94.23. As a result the FSLY 7.75% have moved up 7.75 points dollar neutral.
- Fastly operates in the highly competitive Content Delivery Network (CDN) space. Their offering is differentiated but not consistently profitable.
- PF total debt is $339mm v $308mm in cash and $1.46 bil mkt cap.
- Bull Case: Fastly’s lead on programable CDNs is sufficient that even if profitability remains elusive a competitor would buy the company for the IP protecting the credit downside. Continued demand for interactive CDNs driven by AI and other dynamic applications, combined with reduced competition from recent competitor Edgio’s bankruptcy, creates equity upside.
- Bear Case: Competition from Akamai (AKAM) and Cloudflare (NET), as well of cloud providers with their own CDN networks, continues with Fastly’s technology edge eventually erased.
1Q Results:
- Revs $144.5mm, up 8.2% yy, beat est $138.4mm.
- EBITDA $7.8mm v $3.75 yy and beat est $4.9mm.
2Q Guide:
- Revs $143 - $147mm beat est $138.4mm
1Q C-Call Cvt Commentary:
Our March 2026 zero-coupon convertible notes became current in the first quarter and are now reflected in our current liabilities. We have adequate liquidity to cover our working capital operating requirements and pay this balance when the notes become due.
Company Description and Industry Backdrop:
Fastly operates a content delivery network (CDN). CDNs operate servers on the edge of telecommunications networks, physically closer to end users, that cache high demand content allowing faster download times and easing network latency bottlenecks. While the role that CDN’s play is crucial and demand continues to grow, the business is highly competitive with most large customers using more than one and negligible switching costs. The historic model was to cache static / unmodified data like a high demand movie. Fastly differentiates itself by enabling customers to program the local servers to provide more interactive, dynamic offerings, that still have the lower latency benefit. Fastly’s advanced offering has required historic and ongoing investment that has not yet translated into a sustainable pricing advantage because of their smaller scale and the intensely competitive environment. What they have accomplished is to carve share for themselves despite their smaller footprint.
Industry conditions have forced consolidation. At the peak there were six focused CDN operators. With the recent bankruptcy of Edgio the market is down to three: Akamai (AKAM), Cloudflare (NET) and Fastly. However, many cloud providers now provide their own CDN networks.
The demand for CDN’s and Fastly’s interactive capabilities continues to grow with AI a likely accelerant. However, Fastly’s competitors are investing in similar capabilities. The key question for the credit is can they sustain a sufficient edge that a competitor would pay for the IP in an amount sufficient to provide a strong recovery on the debt should the company never reach sufficient pricing and scale.
Balance Sheet @ 1Q:
Cash: $307.3
Debt:
$60mm 1L Revolver undrawn
Cvt 0% 3/26 $188.6
Cvt 7.75% 6/28 150.0
Total Debt $338.6
Mkt Cap: $1,461.0
- Dec 2nd Cvt Issue: $150mm issued to buyback $157.9mm existing 0% 26 = 95 price.
- Revolver: S+10+200, 4/2027 maturity (w/ springer - see below). 3rd amendment April 30, 24 extended maturity from June 24 to April 27 and reduced commitment from $100mm to $60mm.
- Covenants:
- Quick Ratio: > 1:25 to 1:00
- Springing revenue growth covenant for periods when quick ratio < 1.75.
- Springing maturity Jan 2027 if net liquidity is <= $200mm, and at anytime up to April 2027 if net liquidity is triggered.
- Covenants:
Source: Company Documents
Comparable Convertible Bond Issues:
Implied Spreads v Debt to EBITDA
Source: Bloomberg, StoneX
Cvt Pre-Mkt Stock Movers:
Recent Notes – By Date
Desk Contacts:
Dave Sposito (Head of Desk) – 212-692-5172 – [email protected]
Zach Johannes (Trading) – 973-222-6189 - [email protected]
Walter McNulty (Sales) – 203-219-5837 – [email protected]
Chris Frascella (Sales) – 203-912-7535 – [email protected]
Rob Weaver (Strategist) – 203-399-7023 – [email protected]
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This commentary is not research or a recommendation and does not take into account whether any product or transaction is suitable for any particular client. SFI does not produce debt research and therefore this communication is not subject to all of the independence and disclosure standards and other requirements applicable to research reports under FINRA’s research rules. This document is intended for institutional investors only and is not subject to all of the independence and disclosure standards applicable to research reports prepared for retail investors. Clients should assume that this document is not independent of SFI’s proprietary interests. SFI trades, and will continue to trade, the securities covered in this document for its own account and on a discretionary basis on behalf of certain clients. Such trading interests may be contrary to or entered into in advance of this document.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc. The views are current only through the date stated and are subject to change at any time based upon market or other conditions, and StoneX Group Inc. disclaims any responsibility to update such views. This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. Past performance does not guarantee future results.
StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and is registered with the MSRB. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser.
This commentary is not research or a recommendation and does not take into account whether any product or transaction is suitable for any particular client. SFI does not produce debt research and therefore this communication is not subject to all of the independence and disclosure standards and other requirements applicable to research reports under FINRA’s research rules. This document is only intended for institutional investors, as defined by FINRA Rule 4512(c), and is not subject to all of the independence and disclosure standards applicable to research reports prepared for retail investors. Clients should assume that this document is not independent of SFI’s proprietary interests. SFI trades, and will continue to trade, the securities covered in this document for its own account and on a discretionary basis on behalf of certain clients. Such trading interests may be contrary to or entered into in advance of this document.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc. The views are current only through the date stated and are subject to change at any time based upon market or other conditions, and StoneX Group Inc. disclaims any responsibility to update such views. This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. Past performance does not guarantee future results.
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