Cloudflare prices $1.75 billion convertible senior notes due 2030

SAN FRANCISCO - Cloudflare, Inc. (NYSE: NET), a technology company whose stock has surged over 50% in the past six months and currently commands a market capitalization of $59.2 billion, announced Thursday the pricing of $1.75 billion in convertible senior notes due 2030 in a private offering to qualified institutional buyers under Rule 144A of the Securities Act.

The company also granted initial purchasers a 13-day option to buy up to an additional $250 million in notes to cover over-allotments. The transaction is expected to close on June 17, 2025, generating approximately $1.72 billion in net proceeds after expenses. According to InvestingPro data, Cloudflare maintains impressive gross profit margins of nearly 77% and operates with a moderate level of debt.

The zero-interest notes will mature on June 15, 2030, unless earlier redeemed, repurchased, or converted. Cloudflare may redeem the notes after June 20, 2028, under specific stock price conditions.

The notes will be convertible at an initial rate of 4.0376 shares of Cloudflare’s Class A common stock per $1,000 principal amount, equivalent to approximately $247.67 per share. This represents a 45% premium over Cloudflare’s June 12 closing price of $170.81 on the New York Stock Exchange. The stock is currently trading near its 52-week high, with a strong liquidity position reflected in its current ratio of 3.2.

In connection with the offering, Cloudflare entered into capped call transactions with certain financial institutions to offset potential dilution from the notes. The company will use approximately $248 million of the proceeds to pay for these transactions.

The remaining funds will be allocated for general corporate purposes, potentially including working capital, capital expenditures, debt repayment, and strategic transactions.

The notes were offered only to qualified institutional buyers and have not been registered under the Securities Act, according to the company’s press release statement.

In other recent news, Cloudflare announced its intention to offer $1.75 billion in Convertible Senior Notes due 2030 to qualified institutional buyers. The company plans to use the proceeds for general corporate purposes, including potential acquisitions and debt repayment, while entering into capped call transactions to mitigate potential stock dilution. Additionally, Cloudflare and TD SYNNEX have expanded their partnership to enhance cybersecurity services in Latin America, aiming to provide comprehensive security solutions to Managed Security Services Partners. This collaboration seeks to address the growing cybersecurity challenges in the region, with Cloudflare reporting a significant increase in blocked cyber threats.

Cloudflare’s recent Annual Meeting of Stockholders saw the re-election of directors and the approval of executive compensation, reflecting strong shareholder support. Furthermore, Stifel analysts maintained their Buy rating on Cloudflare, highlighting the company’s robust first-quarter performance, which exceeded both company guidance and analyst estimates. Notable achievements include Cloudflare’s largest top-line revenue beat since 2020 and securing significant deals, including a $130 million contract.

The company’s customer base continues to grow, marking the eighth consecutive quarter of increase, alongside advancements in AI initiatives and Zero-Trust security. Cloudflare’s sales productivity has improved, and the company has reaffirmed its full-year guidance for fiscal year 2025, indicating a cautious yet optimistic outlook. These developments underscore Cloudflare’s strategic focus and ongoing momentum in the market.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.