Snap Inc. (NYSE: SNAP) announced today the pricing of $850.0
million principal amount of 0.25% convertible senior notes due 2025
in a private placement to qualified institutional buyers pursuant
to Rule 144A under the Securities Act of 1933, as amended, or the
Securities Act. The aggregate principal amount of the offering was
increased from the previously announced offering size of $750.0
million. Snap also granted the initial purchasers of the notes an
option to purchase up to an additional $150.0 million principal
amount of notes. The sale of the notes is expected to close on
April 28, 2020, subject to customary closing conditions.
The notes will be general unsecured obligations of Snap, and
interest of 0.25% per year will be payable semiannually in arrears
on May 1 and November 1 of each year, beginning on November 1,
2020.
The notes will mature on May 1, 2025, unless repurchased,
redeemed, or converted in accordance with their terms prior to the
maturity date. The notes will be convertible at the option of the
holders prior to the close of business on the business day
immediately preceding February 1, 2025 only on the satisfaction of
certain conditions and during certain periods. After that, the
notes will be convertible at the option of the holders at any time
until the close of business on the business day immediately
preceding the maturity date. On conversion, Snap will elect to
settle the notes in cash, shares of Snap’s Class A common stock, or
a combination of cash and shares of Snap’s Class A common
stock.
Snap may not redeem the notes prior to May 6, 2023. Snap may
redeem all or any portion of the notes, at its option, for cash on
or after May 6, 2023 if the last reported sale price of Snap Class
A common stock has been at least 130% of the conversion price then
in effect for at least 20 trading days (whether or not
consecutive), including the trading day immediately before the date
on which Snap provides notice of redemption, during any 30
consecutive trading day period ending on, and including, the
trading day immediately before the date on which Snap provides
notice of redemption at a redemption price equal to 100% of the
principal amount of the notes to be redeemed, plus accrued and
unpaid interest to, but excluding, the redemption date.
On the occurrence of certain events that constitute a
fundamental change (as defined in the indenture governing the
notes), holders of the notes will have the right to require Snap to
repurchase all or a portion of their notes for cash at a repurchase
price equal to 100% of their principal amount, plus accrued and
unpaid interest to, but excluding the repurchase date. Under
certain circumstances, Snap will also be required to increase the
conversion rate for holders who convert their notes in connection
with certain events, including any fundamental change, occurring
prior to the maturity date or in connection with Snap’s issuance of
a notice of redemption.
The notes will have an initial conversion rate of 46.1233 shares
of Snap Class A common stock per $1,000 principal amount of notes,
which is subject to adjustment in certain circumstances. This is
equivalent to an initial conversion price of approximately $21.68
per share. The initial conversion price represents a premium of
approximately 35% to the $16.06 per share closing price of Snap
Class A common stock on the New York Stock Exchange on April 23,
2020. Snap estimates that the net proceeds from the offering will
be approximately $840.1 million (or approximately $988.5 million if
the initial purchasers exercise their option to purchase additional
notes in full), after deducting the initial purchasers’ discounts
and commissions and estimated expenses payable by Snap. Snap
intends to use approximately $85.0 million of the net proceeds from
the offering to pay the cost of the capped call transactions
described below, and the remaining net proceeds from the offering
for general corporate purposes, including working capital,
operating expenses, and capital expenditures. If the initial
purchasers exercise their option to purchase additional notes in
full, Snap expects to use a portion of the net proceeds from such
additional notes to enter into additional capped call transactions.
Snap may also use a portion of the net proceeds to acquire
complementary businesses, products, services, or technologies or
for repurchases of Snap’s common stock, although it has no
commitments for any material acquisitions or stock repurchases at
this time.
The notes and any shares of Snap Class A common stock issuable
on conversion of the notes have not been registered under the
Securities Act or any state securities laws. Unless a subsequent
sale is registered under the Securities Act, the notes and shares
of Snap Class A common stock issuable on conversion of the notes
may only be offered or sold in the United States in a transaction
that is exempt from, or in a transaction not subject to, the
registration requirements of the Securities Act and other
applicable securities laws.
In connection with the pricing of the notes, Snap entered into
capped call transactions with certain of the initial purchasers of
the notes or their respective affiliates and other financial
institutions, collectively, the capped call counterparties. The
capped call transactions cover, subject to customary anti-dilution
adjustments, the number of shares of Snap Class A common stock that
will initially underlie the notes, assuming the initial purchasers
do not exercise their option to purchase additional notes. The
capped call transactions are expected generally to reduce potential
dilution to holders of Snap’s Class A common stock on any
conversion of notes or offset any cash payments Snap is required to
make in excess of the principal amount of any such converted notes,
as the case may be, with such reduction or offset subject to a cap
based on the cap price. The cap price of the capped call
transactions is initially $32.12 per share of Snap’s Class A common
stock, representing a premium of 100% above the last reported sale
price of $16.06 per share of Snap’s Class A common stock on April
23, 2020, and is subject to certain adjustments under the terms of
the capped call transactions.
In connection with establishing their initial hedges of the
capped call transactions, the capped call counterparties or their
respective affiliates may purchase shares of Snap Class A common
stock or enter into various derivative transactions with respect to
Snap 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 Snap Class A common
stock or the notes at that time.
In addition, the capped call counterparties or their respective
affiliates may modify their hedge positions by entering into or
unwinding various derivatives with respect to Snap Class A common
stock or purchasing or selling Snap Class A common stock 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 notes or
following any repurchase of notes by Snap on any fundamental change
repurchase date or otherwise). This activity could also cause or
avoid an increase or decrease in the market price of Snap Class A
common stock or the notes, which could affect noteholders’ ability
to convert the notes and, to the extent the activity occurs during
any observation period related to a conversion of notes, it could
affect the amount and value of the consideration that noteholders
will receive on conversion of such notes.
This press release is not an offer to sell and is not soliciting
an offer to buy any securities, nor will it constitute an offer,
solicitation, or sale of the securities in any jurisdiction in
which such offer, solicitation, or sale would be unlawful prior to
the registration or qualification under the securities laws of any
such jurisdiction.
About Snap Inc.
Snap Inc. is a camera company. We believe that reinventing the
camera represents our greatest opportunity to improve the way
people live and communicate. We contribute to human progress by
empowering people to express themselves, live in the moment, learn
about the world, and have fun together.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of
the Securities Exchange Act of 1934, as amended, about Snap and
Snap’s industry that involve substantial risks and uncertainties.
All statements other than statements of historical facts contained
in this press release, including statements regarding the expected
closing of the offering, the anticipated use of the net proceeds
from the offering, and expectations regarding the effect of the
capped call transactions and regarding actions of the capped call
counterparties and their respective affiliates, are forward-looking
statements. In some cases, you can identify forward-looking
statements because they contain words such as “anticipate,”
“believe,” “contemplate,” “continue,” “could,” “estimate,”
“expect,” “going to,” “intend,” “may,” “plan,” “potential,”
“predict,” “project,” “should,” “target,” “will,” or “would” or the
negative of these words or other similar terms or expressions. Snap
cautions you that the foregoing may not include all of the
forward-looking statements made in this press release.
You should not rely on forward-looking statements as predictions
of future events. Snap has based the forward-looking statements
contained in this press release primarily on its current
expectations and projections about future events and trends that it
believes may affect Snap’s business, financial condition, results
of operations, and prospects. These forward-looking statements are
subject to risks and uncertainties related to: Snap’s financial
performance, including revenues, cost of revenues, operating
expenses and the impact of the COVID-19 pandemic on Snap’s business
and operations, and its ability to attain and sustain
profitability; the ability to generate and sustain positive cash
flow; the ability to attract and retain users and partners; the
ability to attract and retain advertisers; the ability to compete
effectively with existing competitors and new market entrants; the
ability to effectively manage its growth and future expenses; the
ability to comply with modified or new laws and regulations
applying to its business; the ability to maintain, protect, and
enhance Snap’s intellectual property; the ability to successfully
expand in Snap’s existing market segments and penetrate new market
segments; the ability to attract and retain qualified employees and
key personnel; the ability to repay outstanding debt; and future
acquisitions of or investments in complementary companies,
products, services, or technologies, and other factors described in
“Risk Factors” in Snap’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2020 which is available on the SEC’s
website at sec.gov. In addition, any forward-looking statements
contained in this press release are based on assumptions that Snap
believes to be reasonable as of this date. Snap undertakes no
obligation to update any forward-looking statements to reflect
events or circumstances after the date of this press release or to
reflect new information or the occurrence of unanticipated events,
except as required by law.
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Investors and Analysts: ir@snap.com
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