AI shakeout lands convertible investors better terms
TLT•A selloff in AI stocks has improved terms for convertible bond investors, with Dropbox’s $1.1 billion offering carrying a 25% conversion premium and Akamai’s bonds paying 1% interest. U.S. convertible sales reached $153.6 billion through October, while the sector index fell about 17.5% from its June peak.
1. Terms shift toward investors
A wave of convertible offerings this week had terms that more evenly balanced issuers and investors after a selloff in AI stocks. Dropbox’s $1.1 billion offering, priced Tuesday, had a conversion premium of about 25%, below the third-quarter average of 35%. Akamai issued two convertible bonds paying 1% interest, up from a third-quarter average of 0.75%.
2. Issuance surged
U.S. convertible sales reached about $153.6 billion by the end of October, compared with $98.6 billion over the same period last year. About 70% of this year’s record issuance was AI-linked, and 45% was tied to core AI infrastructure, Barclays’ Venu Krishna said. In 2025, 46 convertible bond deals carried no interest, compared with 11 in 2024.
3. Market cools after selloff
The FTSE Russell U.S. Convertible Bonds Index fell about 17.5% from its all-time peak in June, leaving it up just under 2% for the year. U.S. convertibles lost more than 6% in October, their worst October since 2008, Barclays data showed. Recent buyers have favored issuers outside data centers, including Xcel Energy, which sold $2.2 billion of converts, and SS&C, which raised about $1 billion.
