Bullish indicating open at $55-$60, IPO prices at $37
Investing.com -- DigitalOcean Holdings Inc (NYSE:DOCN) stock dropped 4.9% after the cloud infrastructure provider announced plans to offer $500 million in convertible senior notes due 2030 in a private offering to qualified institutional buyers.
The company intends to grant initial purchasers an option to buy an additional $75 million in notes. The unsecured notes will mature on August 15, 2030, with interest payable semi-annually, unless earlier converted, redeemed, or repurchased.
DigitalOcean plans to use the proceeds to fund capped call transactions and to repurchase a portion of its existing 0.00% convertible senior notes due 2026. The company will use the net proceeds, along with cash on hand and up to $500 million in term loans under its credit facility, for these repurchases.
In connection with the offering, DigitalOcean will enter into capped call transactions to reduce potential dilution to common stock upon conversion of the notes. These transactions are expected to cover the number of shares initially underlying the notes, subject to customary adjustments.
Concurrent with the offering, the company plans to adopt a new $100 million stock repurchase program that will run through July 31, 2027. The repurchases will be made through various methods including open market purchases and 10b5-1 plans, depending on market conditions.
The notes will be convertible under certain circumstances, with DigitalOcean having the option to settle conversions in cash, shares of common stock, or a combination of both. The notes will not be redeemable before August 15, 2028, after which they may be redeemed under specific conditions.
The interest rate, initial conversion rate, and other terms of the notes will be determined at the time of pricing.
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