Square, Inc. (“Square”) (NYSE:SQ) today announced the pricing of
$500 million aggregate principal amount of convertible senior notes
due 2026 (the “2026 Notes”) and $500 million aggregate principal
amount of convertible senior notes due 2027 (the “2027 Notes” and,
together with the 2026 Notes, the “Notes”) in a private placement
to qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933, as amended (the “Act”). Square also granted
the initial purchasers of the Notes a 30-day option to purchase up
to an additional $75 million aggregate principal amount of 2026
Notes and up to an additional $75 million aggregate principal
amount of 2027 Notes, in each case, solely to cover
over-allotments, if any. The sale of the Notes to the initial
purchasers is expected to settle on November 13, 2020, subject to
customary closing conditions, and is expected to result in
approximately $983.7 million in net proceeds to Square (or
approximately $1,131.4 million if the initial purchasers exercise
their over-allotment options in full) after deducting the initial
purchasers’ discount and estimated offering expenses payable by
Square.
The Notes will be senior, unsecured obligations of Square. The
2026 Notes will not bear interest and the principal will not
accrete. The 2027 Notes will bear interest at a rate of 0.25% per
year and will be payable semi-annually in arrears on May 1 and
November 1 of each year, beginning on May 1, 2021. The 2026 Notes
will mature on May 1, 2026 and the 2027 Notes will mature on
November 1, 2027, in each case, unless earlier repurchased,
redeemed or converted.
Square expects to use approximately $49.0 million of the net
proceeds of the offering of the Notes to pay the cost of the
convertible note hedge transactions described below, after such
cost is partially offset by the proceeds of the warrant
transactions described below, to raise the effective conversion
price of the Notes from Square’s perspective, and to use the
remaining proceeds of the offering for general corporate
purposes.
The initial conversion rate for each series of the Notes is
3.3430 shares of Square’s Class A common stock (“Class A common
stock”) per $1,000 principal amount of such Notes (which is
equivalent to an initial conversion price of approximately $299.13
per share. Prior to the close of business on the business day
immediately preceding February 1, 2026, in the case of the 2026
Notes, and prior to the close of business on the business day
immediately preceding August 1, 2027, in the case of the 2027
Notes, the Notes will be convertible at the option of the
noteholders only upon the satisfaction of specified conditions and
during certain periods. On or after February 1, 2026, to the close
of business on the second scheduled trading day preceding May 1,
2026, the 2026 Notes will be convertible at the option of the
noteholders at any time regardless of these conditions. On or after
August 1, 2027, to the close of business on the second scheduled
trading day preceding November 1, 2027, the 2027 Notes will be
convertible at the option of the noteholders at any time regardless
of these conditions. Conversions of the Notes will be settled in
cash, shares of Class A common stock, or a combination thereof, at
Square’s election. The last reported sale price of the Class A
common stock on November 9, 2020 was $184.08 per share.
Square may redeem for cash all or any portion of the Notes, at
its option, on or after November 5, 2023, in the case of the 2026
Notes, and on or after November 5, 2024, in the case of the 2027
Notes, if the last reported sale price of Square’s Class A common
stock has been at least 130% of the conversion price for the
relevant series of Notes then in effect for at least 20 trading
days (whether or not consecutive) during any 30 consecutive trading
day period (including the last trading day of such period) ending
on, and including, the trading day immediately preceding the date
on which Square provides notice of redemption at a redemption price
equal to 100% of the principal amount of the relevant series of
Notes to be redeemed, plus accrued and unpaid interest to, but
excluding, the redemption date.
In connection with the pricing of the Notes, Square entered into
privately negotiated convertible note hedge transactions with some
of the initial purchasers, their affiliates and other financial
institutions (the “hedge counterparties”). The convertible note
hedge transactions are expected generally to reduce the potential
dilution to the Class A common stock upon any conversion of the
Notes and/or offset the cash payments Square is required to make in
excess of the principal amount of converted Notes, as the case may
be, in the event that the market price of the Class A common stock
is greater than the strike price of the convertible note hedge
transactions, which initially corresponds to the initial conversion
price of the relevant Notes. Square also entered into privately
negotiated warrant transactions with the hedge counterparties. The
warrant transactions could separately have a dilutive effect to the
extent the market value per share of Class A common stock exceeds
the strike price of any warrant transactions, unless Square elects,
subject to certain conditions set forth in the related warrant
confirmations, to settle the warrant transactions in cash. The
strike price of the warrant transactions will initially be
approximately $368.16 per share and approximately $414.18 per
share, which represents a premium of approximately 100% and 125%,
respectively, over the last reported sale price of the Class A
common stock on November 9, 2020, and is subject to certain
adjustments under the terms of the warrant transactions. If the
initial purchasers exercise their over-allotment options to
purchase additional Notes, Square intends to enter into additional
convertible note hedge transactions and additional warrant
transactions with the hedge counterparties.
Square expects that, in connection with establishing their
initial hedge of the convertible note hedge transactions and
warrant transactions, the hedge counterparties or their respective
affiliates may purchase shares of the Class A common stock and/or
enter into various derivative transactions with respect to the
Class A common stock concurrently with, or shortly after, the
pricing of the Notes. These activities could increase (or reduce
the size of any decrease in) the market price of the Class A common
stock or the Notes at that time. In addition, Square expects that
the hedge counterparties or their respective affiliates may modify
their hedge positions by entering into or unwinding derivative
transactions with respect to the Class A common stock and/or by
purchasing or selling shares of the Class A common stock or other
securities of Square in secondary market transactions following the
pricing of the Notes and prior to the relevant maturity date of the
Notes (and are likely to do so during any observation period
relating to a conversion of the Notes or in connection with any
repurchase of Notes by Square). This activity could also cause or
avoid an increase or a decrease in the market price of the Class A
common stock or the Notes, which could affect the ability of
noteholders to convert the Notes and, to the extent the activity
occurs during any observation period related to a conversion of the
Notes, could affect the amount and value of the consideration that
noteholders will receive upon conversion of the Notes. The
convertible note hedge transactions and warrant transactions have
not been, and will not be, registered under the Act or the
securities laws of any other jurisdiction and may not be offered or
sold in the United States absent registration or an applicable
exemption from such registration requirements.
This announcement is neither an offer to sell nor a solicitation
of an offer to buy any of these securities and shall not constitute
an offer, solicitation, or sale in any jurisdiction in which such
offer, solicitation, or sale is unlawful. The Notes and the shares
of Class A common stock issuable upon conversion of the Notes, if
any, have not been, and will not be, registered under the Act or
the securities laws of any other jurisdiction, and unless so
registered, may not be offered or sold in the United States except
pursuant to an applicable exemption from the registration
requirements of the Act and applicable state laws.
About Square, Inc.
Square, Inc. (NYSE: SQ) builds tools to empower businesses and
individuals to participate in the economy. Sellers use Square to
reach buyers online and in-person, manage their business, and
access financing. And individuals use Cash App to spend, send,
store, and invest money. Square has offices in the United States,
Canada, Japan, Australia, Ireland, Spain, and the UK.
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Media Contact: press@squareup.com or Investor
Relations Contact: ir@squareup.com
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