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Investing.com -- Cloudflare (NYSE:NET) stock fell 2.4% in after-hours trading Monday after the company announced plans to offer $1.75 billion in convertible senior notes due 2030 through a private placement to qualified institutional buyers.
The web infrastructure and security company said the notes will be senior, unsecured obligations that bear interest payable semi-annually. Cloudflare will have the option to convert the notes into cash, shares of its Class A common stock, or a combination of both. The interest rate and conversion terms will be determined during the pricing of the offering.
Cloudflare also plans to grant initial purchasers a 13-day option to buy up to an additional $250 million in notes to cover over-allotments. In connection with the offering, the company expects to enter into capped call transactions with initial purchasers or their affiliates to offset potential dilution from the notes.
The company intends to use part of the net proceeds to pay for the capped call transactions, with the remainder allocated for general corporate purposes. These may include working capital, capital expenditures, debt repayment, and potential acquisitions or strategic transactions.
The capped call transactions are expected to cover the number of Class A common shares underlying the notes, with a cap price initially representing at least a 150% premium over Cloudflare’s last reported stock price on the pricing date.
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