Street Calls of the Week
CAMARILLO, Calif. - Semtech Corporation (NASDAQ:SMTC), a semiconductor company with a market capitalization of $6.15 billion and impressive year-to-date returns of 14.65%, has priced an offering of $350 million in 0% convertible senior notes due 2030 in a private placement to qualified institutional buyers, the semiconductor company announced Wednesday. According to InvestingPro data, the company has demonstrated strong momentum with a remarkable 174.21% price return over the past six months.
The sale is expected to close around October 10, 2025, generating approximately $340.2 million in net proceeds after deducting expenses. The initial purchasers have an option to buy an additional $52.5 million in notes by October 15, 2025. With a current ratio of 2.53, InvestingPro analysis shows that Semtech maintains strong liquidity, with liquid assets well exceeding short-term obligations.
Semtech plans to use about $220.6 million of the proceeds, along with issuing approximately 3 million shares of common stock, to exchange approximately $219 million of its existing 1.625% convertible notes due 2027. Additionally, around $63.1 million plus 2.2 million shares will be used to exchange the remaining $61.95 million of its 4% convertible notes due 2028.
The company will allocate approximately $56.5 million to repay $56.3 million in term loans under its senior credit facilities. About $27.3 million from cash reserves will fund capped call transactions related to the offering.
The notes will not bear regular interest, and the principal amount will not accrete. The initial conversion rate is 9.8964 shares per $1,000 principal amount, equivalent to a conversion price of approximately $101.05 per share—a 42.50% premium over Semtech’s closing price on October 7.
The notes will not be redeemable before October 20, 2028. After that date, they may be redeemed under certain conditions, including if Semtech’s stock price reaches at least 130% of the conversion price.
In connection with the offering, Semtech entered into capped call transactions with financial institutions to potentially reduce dilution upon conversion of the notes. The cap price is initially set at $141.82 per share, representing a 100% premium over Semtech’s closing price on October 7.
The notes and related common stock have not been registered under the Securities Act and are being offered only to qualified institutional buyers.
This information is based on a press release statement from Semtech Corporation.
In other recent news, Semtech Corporation announced its plan to offer $350 million in convertible senior notes due 2030 through a private placement to qualified institutional buyers. The company also provides an option for initial purchasers to buy an additional $52.5 million in notes by October 2025. This development follows UBS reiterating its Buy rating on Semtech, maintaining a $65 price target after the company reported quarterly results that met expectations.
Stifel raised its price target for Semtech to $80, highlighting the company’s improved business profile and potential operating leverage expected through 2025. Additionally, Oppenheimer upgraded Semtech from Perform to Outperform, setting a price target of $81, citing growth opportunities in AI and LoRa technologies. Benchmark also increased its price target to $76 after a strategic discussion with Semtech’s leadership at a recent conference. These updates reflect the ongoing strategic transformation and growth prospects for Semtech, particularly in its IoT and data center segments.
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