Zscaler prices $1.5 billion convertible senior notes offering

SAN JOSE - Cybersecurity firm Zscaler, Inc. (NASDAQ:ZS), currently valued at nearly $49 billion and showing impressive 74% gains over the past six months according to InvestingPro data, announced Monday the pricing of $1.5 billion in convertible senior notes due 2028 in a private offering to qualified institutional buyers.

The zero-interest notes will mature on July 15, 2028, unless converted or repurchased earlier. The initial conversion rate is set at 2.2752 shares of Zscaler’s common stock per $1,000 principal amount, equivalent to a conversion price of approximately $439.52 per share, representing a 40% premium over Monday’s closing price.

Zscaler expects to raise approximately $1.48 billion from the offering, or $1.70 billion if the initial purchasers exercise their 13-day option to purchase up to an additional $225 million in notes. The transaction is expected to close on July 3.

The company plans to allocate $171 million of the proceeds to fund capped call transactions with certain financial institutions, which are designed to reduce potential dilution to shareholders upon conversion of the notes. The remainder will be used for general corporate purposes, including working capital, capital expenditures, and potential acquisitions.

The capped call transactions have an initial cap price of $784.85 per share, representing a 150% premium over Monday’s closing price of Zscaler’s stock.

The notes and the shares potentially issuable upon conversion have not been registered under the Securities Act and may not be offered or sold in the United States without registration or an applicable exemption from registration requirements.

This information is based on a press release statement from Zscaler.

In other recent news, Zscaler announced plans to raise $1.5 billion through a private offering of convertible senior notes due 2028. The company intends to use a portion of the proceeds for capped call transactions to mitigate potential stock dilution, with the remaining funds allocated for general corporate purposes, including potential acquisitions. This capital raise is a significant move to bolster Zscaler’s financial position. In analyst updates, UBS has increased its price target for Zscaler to $365 from $315, maintaining a Buy rating, citing strong platform momentum and positive feedback from customer interactions. Additionally, JMP Securities reiterated its Market Outperform rating with a $310 price target, emphasizing Zscaler’s robust growth and impressive financial metrics. JPMorgan also raised its price target to $348 from $292, maintaining an Overweight rating, following positive discussions with Zscaler’s management about the company’s growth drivers and strategic initiatives. These developments highlight Zscaler’s strong market positioning and ongoing expansion efforts in the cybersecurity industry.

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