Unity plans $500 million convertible notes offering

Published 24/02/2025, 13:06
Unity plans $500 million convertible notes offering

SAN FRANCISCO - Unity Software Inc . (NYSE: NYSE:U), a prominent platform for creating and growing games and interactive experiences with a market capitalization of $11.46 billion and annual revenue of $1.81 billion, today unveiled plans to offer $500 million of Convertible Senior Notes due 2030 in a private placement aimed at qualified institutional buyers. According to InvestingPro data, the company currently operates with a moderate level of debt and maintains strong liquidity, with a healthy current ratio of 2.5. The company also intends to provide these initial purchasers with an option to buy up to an additional $75 million of notes within a 13-day window starting from the issuance date.

The notes, which are to be general unsecured obligations of Unity, will accrue interest payable semiannually in arrears. At the time of conversion, Unity may pay or deliver cash, shares of its common stock, or a combination thereof, at its discretion. The specific interest rate, initial conversion rate, and other terms will be set at the time of the offering’s pricing.

Unity plans to allocate the net proceeds from this offering to finance the cost of capped call transactions, which are expected to reduce potential stock dilution upon note conversion or offset cash payments exceeding the principal amount of converted notes, subject to a cap. Additionally, the funds, along with available cash, may be used to repurchase about $500 million of its 0% Convertible Senior Notes due 2026, subject to market conditions. While the company isn’t currently profitable, InvestingPro analysis indicates that analysts expect Unity to achieve profitability this year, with projected earnings per share of $0.73 for fiscal year 2025. Should the option to purchase additional notes be exercised, Unity anticipates using a portion of the proceeds to enter into further capped call transactions. The remaining proceeds are earmarked for general corporate purposes, including potential future repurchases of the 2026 Notes, acquisitions, strategic investments, working capital, operating expenses, and capital expenditures.

In relation to the capped call transactions, Unity expects the option counterparties or their affiliates to engage in derivative transactions with Unity’s common stock and possibly purchase shares of the company’s stock around the time of the notes’ pricing. These actions could affect Unity’s stock price or the notes’ market price. Furthermore, these counterparties may adjust their hedge positions by buying or selling Unity’s stock or engaging in other derivative transactions, potentially influencing the stock’s market price and affecting noteholders’ conversion outcomes.

The notes and any shares of common stock issuable upon conversion will not be registered under the Securities Act or any state securities laws and cannot be offered or sold in the United States absent registration or an applicable exemption from such requirements.

This press release contains forward-looking statements subject to risks and uncertainties, including the proposed offering’s size, terms, and timing, as well as the anticipated use of proceeds and potential impact on stock dilution and market prices. Unity’s actual events could materially differ due to these risks.

The information in this article is based on a press release statement from Unity Software Inc .

In other recent news, Unity Software (ETR:SOWGn) has seen several notable developments that may interest investors. Stifel analysts have raised their price target for Unity Software to $35, up from $28, following the company’s release of its fourth-quarter earnings and first-quarter guidance. The company is preparing for an update to its advertising platform named Vector, which could potentially enhance customer return on investment. Meanwhile, Needham analysts have increased their price target to $33 from $26, maintaining a Buy rating and expressing optimism about Unity’s Grow business prospects. UBS also adjusted its price target to $30 from $23, keeping a Neutral rating and highlighting the potential of Unity’s AI/ML strategies.

In terms of partnerships, Unity has been selected by Toyota Motor (NYSE:TM) Corporation to develop the next-generation graphical user interface for its in-car systems, leveraging Unity’s real-time 3D technology. JMP Securities has maintained a Market Perform rating on Unity Software, indicating a cautious yet stable outlook. The firm’s analysts noted that the macroeconomic environment is stabilizing and expressed a moderately positive view on Unity’s shares, although they have not revised their price target. These developments reflect a dynamic period for Unity Software, with various analyst opinions and strategic partnerships shaping its current landscape.

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

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