Dropbox, Inc. Announces Upsize and Pricing of $1.306 Billion Convertible Senior Notes Offering
February 24 2021 - 3:29AM
Business Wire
Dropbox, Inc. (“Dropbox”) (NASDAQ: DBX) today announced the
pricing of $653,000,000 aggregate principal amount of convertible
senior notes due 2026 (the “2026 Notes”) and $653,000,000 aggregate
principal amount of convertible senior notes due 2028 (the “2028
Notes” and, together with the 2026 Notes, the “Notes”) in a private
placement to qualified institutional buyers pursuant to Rule 144A
under the Securities Act of 1933, as amended (the “Act”). The
aggregate principal amount of the offering was increased from the
previously announced offering size of $1.135 billion. Dropbox also
granted the initial purchasers of the Notes a 13-day option to
purchase up to an additional $65,300,000 aggregate principal amount
of 2026 Notes and up to an additional $65,300,000 aggregate
principal amount of 2028 Notes. The sale of the Notes to the
initial purchasers is expected to settle on February 26, 2021,
subject to customary closing conditions, and is expected to result
in approximately $1,286 million in net proceeds to Dropbox (or
approximately $1,414 million if the initial purchasers exercise
their option to purchase additional notes in full) after deducting
the initial purchasers’ discount and estimated offering expenses
payable by Dropbox.
The Notes will be senior, unsecured obligations of Dropbox. The
2026 Notes and the 2028 Notes are each referred to herein as a
series of notes. The Notes will not bear interest and the principal
of each series of Notes will not accrete. The 2026 Notes will
mature on March 1, 2026 and the 2028 Notes will mature on March 1,
2028, in each case unless earlier converted, redeemed or
repurchased.
Dropbox intends to use approximately $58.6 million of the net
proceeds of the offering of the Notes to pay the cost of the
convertible note hedge transactions described below, after such
cost is partially offset by the proceeds of the warrant
transactions described below, approximately $200 million of the net
proceeds from this offering to repurchase shares of Dropbox’s Class
A common stock (“Class A common stock”) at yesterday’s closing
price of $23.18 per share from institutional investors through one
of the initial purchasers or their affiliates, as Dropbox’s agent,
concurrently with the pricing of this offering, and to use the
remaining proceeds of the offering for general corporate purposes,
including repurchases of its Class A common stock.
The 2026 Notes may be converted at an initial conversion rate of
26.1458 shares of Dropbox’s Class A common stock per $1,000
principal amount of such notes (equivalent to an initial conversion
price of approximately $38.25 per share of Class A common stock),
and the 2028 Notes may be converted at an initial conversion rate
of 28.2889 shares of Class A common stock per $1,000 principal
amount of such notes (equivalent to an initial conversion price of
approximately $35.35 per share of Class A common stock). Prior to
the close of business on the business day immediately preceding
December 1, 2025, in the case of the 2026 Notes, and prior to the
close of business on the business day immediately preceding
December 1, 2027, in the case of the 2028 Notes, the Notes will be
convertible at the option of the noteholders only upon the
satisfaction of specified conditions and during certain periods. On
or after December 1, 2025 in the case of the 2026 Notes, and on or
after December 1, 2027 in the case of the 2028 Notes, to the close
of business on the second scheduled trading day immediately
preceding the relevant maturity date, a holder of the relevant
series of notes may convert all or any portion of its notes of such
series regardless of these conditions. For each series of Notes,
upon conversion, Dropbox will pay cash up to the aggregate
principal amount of Notes to be converted and pay or deliver, as
the case may be, cash, shares of Dropbox’s Class A common stock or
a combination of cash and shares of Dropbox’s Class A common stock,
at Dropbox’s election, in respect of the remainder. The last
reported sale price of the Class A common stock on February 23,
2021 was $23.18 per share.
Dropbox may redeem for cash all or any portion of the Notes, at
its option, on or after March 6, 2024, in the case of the 2026
Notes, and on or after March 6, 2025, in the case of the 2028
Notes, if the last reported sale price of Dropbox’s Class A common
stock has been at least 130% of the conversion price for the
relevant series of Notes then in effect for at least 20 trading
days (whether or not consecutive) during any 30 consecutive trading
day period (including the last trading day of such period) ending
on, and including, the trading day immediately preceding the date
on which Dropbox provides notice of redemption at a redemption
price equal to 100% of the principal amount of the relevant series
of Notes to be redeemed, plus any accrued and unpaid special
interest to, but excluding, the redemption date.
In connection with the pricing of the Notes, Dropbox entered
into convertible note hedge and warrant transactions with certain
of the initial purchasers, their affiliates and other financial
institutions (the “option counterparties”). The convertible note
hedge transactions are expected generally to reduce the potential
dilution to Dropbox’s Class A common stock upon any conversion of
the Notes and/or offset any cash payments Dropbox is required to
make in excess of the principal amount of converted Notes, as the
case may be. The warrant transactions would separately have a
dilutive effect to the extent that the market value per share of
the Class A common stock exceeds the strike price of any warrants
unless, subject to the terms of the warrant transactions, Dropbox
elects to cash settle the warrants. The strike price of the warrant
transactions will initially be approximately $46.36 per share,
which represents a premium of 100% over the last reported sale
price of the Class A common stock on February 23, 2021, and is
subject to certain adjustments under the terms of the warrant
transactions. If the initial purchasers exercise their option to
purchase additional notes, Dropbox intends to enter into additional
convertible note hedge and additional warrant transactions relating
to the additional notes.
In connection with establishing their initial hedge of the
convertible note hedge and warrant transactions, the option
counterparties or their respective affiliates expect to purchase
shares of the Class A common stock and/or enter into various
derivative transactions with respect to the Class A common stock
concurrently with, or shortly after, the pricing of the Notes. This
activity could increase (or reduce the size of any decrease in) the
market price of the Class A common stock or the Notes at that time.
In addition, the option counterparties or their respective
affiliates may modify their hedge positions by entering into or
unwinding various derivatives with respect to the Class A common
stock and/or by purchasing or selling shares of the Class A common
stock or other securities of Dropbox in secondary market
transactions following the pricing of the Notes and prior to the
maturity of the Notes (and are likely to do so during any
observation period related to a conversion of the Notes or in
connection with any repurchase of Notes by Dropbox). This activity
could also cause or avoid an increase or a decrease in the market
price of the Class A common stock or the Notes, which could affect
the ability of noteholders to convert the Notes and, to the extent
the activity occurs during any observation period related to a
conversion of the Notes, it could affect the amount and value of
the consideration that noteholders will receive upon conversion of
such Notes.
This announcement is neither an offer to sell nor a solicitation
of an offer to buy any of these securities and shall not constitute
an offer, solicitation, or sale in any jurisdiction in which such
offer, solicitation, or sale is unlawful. The convertible note
hedge transactions, warrant transactions, Notes and the shares of
Class A common stock issuable upon conversion of the Notes, if any,
have not been, and will not be, registered under the Act or the
securities laws of any other jurisdiction, and unless so
registered, may not be offered or sold in the United States except
pursuant to an applicable exemption from the registration
requirements of the Act and applicable state laws.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210224005410/en/
Media Contact: Tessa Chen press@dropbox.com or
Investor Relations Contact: Rob Bradley IR@dropbox.com
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