Square, Inc. Announces Pricing of $1.0 Billion Convertible Notes Offering
March 03 2020 - 6:30AM
Business Wire
Square, Inc. (“Square”) (NYSE:SQ) today announced the pricing of
$1.0 billion aggregate principal amount of convertible senior notes
due 2025 (the “Notes”) in a private placement to qualified
institutional buyers pursuant to Rule 144A under the Securities Act
of 1933, as amended (the “Act”). Square also granted the initial
purchasers of the Notes a 30-day option to purchase up to an
additional $150 million aggregate principal amount of the Notes
solely to cover over-allotments, if any. The sale of the Notes to
the initial purchasers is expected to settle on March 5, 2020,
subject to customary closing conditions, and is expected to result
in approximately $984.9 million in net proceeds to Square (or
approximately $1,132.7 million if the initial purchasers exercise
their over-allotment option in full) after deducting the initial
purchasers’ discount and estimated offering expenses payable by
Square.
The Notes will be senior, unsecured obligations of Square. The
Notes will bear interest at a rate of 0.125% per year. Interest
will be payable semi-annually in arrears on March 1 and September 1
of each year, beginning on September 1, 2020. The Notes will mature
on March 1, 2025, unless earlier repurchased or converted.
Square expects to use approximately $49.7 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, to raise the effective conversion
price of the Notes from Square’s perspective, and to use the
remaining proceeds of the offering for general corporate
purposes.
The initial conversion rate for the Notes is 8.2641 shares of
Square’s Class A common stock (“Class A common stock”) per $1,000
principal amount of Notes (which is equivalent to an initial
conversion price of approximately $121.01 per share). Prior to the
close of business on the business day immediately preceding
December 1, 2024, the Notes will be convertible at the option of
the noteholders only upon the satisfaction of specified conditions
and during certain periods. Thereafter until the close of business
on the second scheduled trading day preceding the maturity date,
the Notes will be convertible at the option of the noteholders at
any time regardless of these conditions. Conversions of the Notes
will be settled in cash, shares of Class A common stock, or a
combination thereof, at Square’s election. The last reported sale
price of the Class A common stock on March 2, 2020 was $80.67 per
share.
Square may redeem for cash all or any portion of the notes, at
its option, on or after March 5, 2023 if the last reported sale
price of Square’s 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) 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 Square 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.
In connection with the pricing of the Notes, Square entered into
privately negotiated convertible note hedge transactions with some
of the initial purchasers and other financial institutions (the
“hedge counterparties”). The convertible note hedge transactions
are expected generally to reduce the potential dilution to the
Class A common stock upon any conversion of the Notes and/or offset
the cash payments Square is required to make in excess of the
principal amount of converted Notes, as the case may be, in the
event that the market price of the Class A common stock is greater
than the strike price of the convertible note hedge transactions,
which initially corresponds to the initial conversion price of the
Notes. Square also entered into privately negotiated warrant
transactions with the hedge counterparties. The warrant
transactions could separately have a dilutive effect to the extent
the market value per share of Class A common stock exceeds the
strike price of any warrant transactions, unless Square elects,
subject to certain conditions set forth in the related warrant
confirmations, to settle the warrant transactions in cash. The
strike price of the warrant transactions will initially be
approximately $161.34 per share, which represents a premium of
approximately 100% over the last reported sale price of the Class A
common stock on March 2, 2020, and is subject to certain
adjustments under the terms of the warrant transactions. If the
initial purchasers exercise their over-allotment option to purchase
additional Notes, Square intends to enter into additional
convertible note hedge transactions and additional warrant
transactions with the hedge counterparties.
Square expects that, in connection with establishing their
initial hedge of the convertible note hedge transactions and
warrant transactions, the hedge counterparties or their respective
affiliates may 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. These activities 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, Square expects that
the hedge counterparties or their respective affiliates may modify
their hedge positions by entering into or unwinding derivative
transactions 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 Square 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 relating to a
conversion of the Notes or in connection with any repurchase of
Notes by Square). 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, could
affect the amount and value of the consideration that noteholders
will receive upon conversion of the Notes. The convertible note
hedge transactions and warrant transactions have not been, and will
not be, registered under the Act or the securities laws of any
other jurisdiction and may not be offered or sold in the United
States absent registration or an applicable exemption from such
registration requirements.
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 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.
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Media Contact: press@squareup.com or Investor
Relations Contact: ir@squareup.com
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