Cloudflare, Inc. Announces Pricing of Offering of $500 Million of 0.75% Convertible Senior Notes Due 2025
13 Maggio 2020 - 10:24AM
Business Wire
Cloudflare, Inc. (“Cloudflare”) (NYSE: NET) today announced the
pricing of $500 million aggregate principal amount of Convertible
Senior Notes due 2025 (the “notes”) in a private offering (the
“offering”) to qualified institutional buyers pursuant to Rule 144A
promulgated under the Securities Act of 1933, as amended (the
“Securities Act”). Cloudflare also granted the initial purchasers
of the notes a 13-day option to purchase up to an additional $75
million aggregate principal amount of the notes. The sale of the
notes to the initial purchasers is expected to settle on May 15,
2020, subject to customary closing conditions, and is expected to
result in approximately $488.2 million in net proceeds to
Cloudflare after deducting the initial purchasers’ discount and
estimated offering expenses payable by Cloudflare (assuming no
exercise of the initial purchasers’ option to purchase additional
notes).
The notes will be senior, unsecured obligations of Cloudflare.
The notes will bear interest at a rate of 0.75% per year. Interest
will be payable semi-annually in arrears on May 15 and November 15
of each year, beginning on November 15, 2020. The notes will mature
on May 15, 2025, unless earlier redeemed, repurchased, or
converted. Cloudflare may not redeem the notes prior to May 20,
2023. Cloudflare may redeem for cash all or any portion of the
notes, at its option, on or after May 20, 2023, if the last
reported sale price of Cloudflare’s Class A common stock has been
at least 130% of the conversion price 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 preceding the
date on which Cloudflare provides notice of redemption at a
redemption price equal to 100% of the principal amount of the notes
to be redeemed, plus any accrued and unpaid interest to, but
excluding, the redemption date. No sinking fund is provided for the
notes, which means that Cloudflare is not required to redeem or
retire the notes periodically. Holders of the notes will have the
right to require Cloudflare to repurchase for cash all or a portion
of their notes upon the occurrence of a fundamental change (as
defined in the indenture governing the notes) at a purchase price
of 100% of their principal amount plus any accrued and unpaid
interest.
The notes will be convertible at an initial conversion rate of
26.7187 shares of Cloudflare’s Class A common stock, per $1,000
principal amount of notes (equivalent to an initial conversion
price of approximately $37.43 per share, which represents a
conversion premium of approximately 30.0% to the last reported sale
price of $28.79 per share of Cloudflare’s Class A common stock on
The New York Stock Exchange on May 12, 2020).
Prior to the close of business on the business day immediately
preceding February 15, 2025, 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 15,
2025 until the close of business on the second scheduled trading
day preceding the maturity date, the 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 Cloudflare’s Class A common stock, or a combination
thereof, at Cloudflare’s election.
In connection with the pricing of the notes, Cloudflare entered
into privately negotiated capped call transactions with certain of
the initial purchasers and/or their respective affiliates and/or
other financial institutions (the “option counterparties”). The
capped call transactions cover, subject to anti-dilution
adjustments, the number of shares of Class A common stock
underlying the notes sold in the offering. The capped call
transactions are generally expected to reduce potential dilution to
Cloudflare’s Class A common stock upon any conversion of the notes
and/or offset any cash payments Cloudflare is required to make in
excess of the principal amount of converted notes, as the case may
be, with such reduction and/or offset subject to a cap. The cap
price of the capped call transactions is initially approximately
$57.58 per share, which represents a premium of 100% over the last
reported sale price of Cloudflare’s Class A common stock of $28.79
per share on May 12, 2020, and is subject to certain adjustments
under the terms of the capped call transactions.
Cloudflare has been advised that, in connection with
establishing their initial hedges of the capped call transactions,
the option counterparties or their respective affiliates expect to
purchase shares of Cloudflare’s 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. This activity could increase (or reduce the size of any
decrease in) the market price of Cloudflare’s Class A common stock
or the notes at that time. In addition, Cloudflare expects that the
option counterparties or their respective affiliates may modify
their hedge positions by entering into or unwinding various
derivatives 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 Cloudflare in secondary market transactions following
the pricing of the notes and prior to the maturity of the notes
(and are likely to do so following any conversion, repurchase, or
redemption of the notes, to the extent Cloudflare exercises the
relevant election under the capped call transactions). 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 following a conversion or during any
observation period related to a conversion of the notes, could
affect the number of shares and value of the consideration that
noteholders will receive upon conversion of the notes.
Cloudflare intends to use approximately $58.6 million of the net
proceeds from the offering of the notes to pay the cost of the
capped call transactions. If the initial purchasers exercise their
option to purchase additional notes, Cloudflare expects to use a
portion of the net proceeds from the sale of such additional notes
to enter into additional capped call transactions with the option
counterparties. Cloudflare intends to use the remainder of the net
proceeds from the offering for general corporate purposes, which
may include working capital, capital expenditures, and potential
acquisitions and strategic transactions.
The notes were only offered to qualified institutional buyers
pursuant to Rule 144A promulgated under the Securities Act by means
of a private offering memorandum. Neither the notes nor the shares
of Cloudflare’s Class A common stock potentially issuable upon
conversion of the notes, if any, have been, or will be, registered
under the Securities 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 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20200513005253/en/
Investor Relations Information Jayson Noland
ir@cloudflare.com
Press Contact Information Daniella Vallurupalli
press@cloudflare.com
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