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Why fuboTV Stock Popped Today

By Evan Niu, CFA - Jan 29, 2021 at 12:55PM

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The sports streaming specialist priced a convertible note offering and shorts continue to get squeezed.

What happened

Shares of fuboTV (FUBO 3.68%) have popped today, up by 12% as of noon EST, as many stocks with high short interest continue to soar due to ongoing short squeezes related to retail traders on Reddit's WallStreetBets forum. Separately, fuboTV announced that it had priced a convertible senior note offering.

So what

The sports streaming platform announced a proposed offering yesterday for $350 million in convertible senior notes that will come due in 2026. The offering has now priced and will pay an interest rate of 3.25% per year. The paper will mature on Feb. 15, 2026, and have an initial conversion rate of 17.3063 shares per $1,000, which translates into a conversion price of $57.78. There was no mention of any capped call transactions, which issuers often use in conjunction with convertible note offerings in order to mitigate potential dilution.

fuboTV interface on a smart TV

Image source: fuboTV.

fuboTV expects net proceeds of $338.4 million, or $389.5 million if the buyers exercise options to purchase additional notes. The tech company plans to use the proceeds for general corporate purposes.

Now what

Companies that conduct convertible note offerings typically see shares fall after the announcement, as hedge funds that utilize convertible arbitrage strategies are usually the institutional investors that participate in such deals. That strategy entails buying the bonds while shorting the stock, which usually creates significant selling pressure as the funds set up their positions.

But market conditions have been far from normal in recent weeks, particularly for stocks with high short interest. As of Jan. 15, fuboTV had short interest of nearly 39.2 million shares, or approximately 73% of the float. fuboTV has been garnering some interest on social media platforms.

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fuboTV, Inc. Stock Quote
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