Cohu's US$260m CB favoured by long-only investors
Cohu gained a strong endorsement by raising an upsized US$260m on Wednesday night that saw technical investors crowded out by long-only, fundamental investors.
In addition to aggressive-end pricing of the 5.25-year CB at a 1.5% coupon and a 32.5% conversion premium, Jefferies, Evercore, and TD Securities placed the bulk of the deal with long-only accounts. Late in the one-day bookbuild, the banks capped orders by convertible arb funds at 5%.
An order book that was six times covered allowed for upsizing from the US$200m base deal size marketed.
ICR Capital was independent adviser.
“Long-only participation is not that unusual, but is not always the case,” said one banker who worked on the offering.
After falling 10% while the deal was being marketed, the semiconductor equipment maker’s shares fell another 2% Thursday to US$20.17, a bit heavy given the extent of long-only participation in the CB.
Cohu viewed the financing as “opportunistic” and to provide “strategic flexibility”, suggesting management are looking for potential acquisitions.
Regardless, Cohu’s business is on the upswing, a point management highlighted by spending US$28.4m of the proceeds raised on a derivative to offset dilution from the CB up to a share price of US$41.02, double the US$20.51 reference and a level not seen since early 2021.
With just under a US$1bn market cap, Cohu is guiding investors to US$125m in revenue for the third quarter or an expected 31% over the same period last year, on a large order for mobile and automotive tests and a steady gross margin.
Cohu is funding from a position of relative strength. At the end of the second quarter, the company had US$209m in cash, and US$18m in total debt.