Item 8.01. Other Events.
Purchase Agreement
On November 19, 2020, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with J.P. Morgan Securities LLC, as representative (the “Representative”) of the initial purchasers named therein (collectively, the “Initial Purchasers”), relating to the Company’s sale of the notes to the Initial Purchasers in a private placement in reliance on Section 4(a)(2) of the Securities Act and for initial resale by the Initial Purchasers to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A under the Securities Act. The Company relied on these exemptions from registration based in part on representations made by the Initial Purchasers in the Purchase Agreement. The Purchase Agreement includes customary representations, warranties and covenants by the Company. Under the terms of the Purchase Agreement, the Company has agreed to indemnify the Initial Purchasers against certain
liabilities under the Securities Act. The notes and the shares of the Company's Class A common stock, par value $0.0001 per share ("common stock") issuable upon conversion of the notes, if any, have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
Indenture
The notes were issued pursuant to an Indenture, dated as of November 24, 2020 (the "Indenture"), between the Company and Wells Fargo Bank, National Association, as trustee ("Wells Fargo"). The notes are senior, unsecured, obligations of GoPro. The notes will bear interest at a rate of 1.25% per year, payable in cash semiannually in arrears on November 15 and May 15 of each year, beginning on May 15, 2021. The notes mature on November 15, 2025 unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date.
The Company may not redeem the notes prior to November 20, 2023. The Company may redeem for cash all or part of the notes, at its option, on or after November 20, 2023 and prior to August 15, 2025, if certain conditions are met. No sinking fund is provided for the notes.
The Indenture includes customary terms and covenants , including certain events of default after which the notes may be due and payable immediately. The following events are considered "events of default," which may result in acceleration of the maturity of the notes:
1.failure by the Company to pay the principal of any note when due and payable at its stated maturity, upon optional redemption, upon any required repurchase, upon declaration of acceleration or otherwise;
2.failure by the Company to pay the interest on any note when due and payable and such failure continues for a period of 30 days;
3.failure by the Company to convert any note in accordance with the Indenture upon exercise of a holder’s conversion right for a period of three business days;
4.failure by the Company to provide timely notice, upon certain events, as described in the Indenture when due;
5.failure by the Company to comply with certain of its obligations under the Indenture;
6.failure by the Company to perform any other agreement required of the Company in the Indenture and such failure continues for 60 days after notice is given in accordance with the Indenture;
7.any indebtedness for money borrowed by the Company or one of the Company’s Significant Subsidiaries (as defined in the Indenture) in an aggregate outstanding principal amount in excess of $30,000,000 (or its foreign currency equivalent) that is not paid at final maturity or upon acceleration and such indebtedness is not discharged, or such acceleration that is not cured or rescinded, within 30 days after written notice as provided in the Indenture; and
8.specified events in bankruptcy, insolvency or reorganization of the Company or any of the Company’s significant subsidiaries.
The notes are convertible into cash, shares of common stock, or a combination thereof, at the Company's election, at an initial conversion rate of 107.1984 shares of common stock per $1,000 principal amount of the notes, which is equivalent to an initial conversion price of approximately $9.3285 per share of common stock, subject to adjustment, with a maximum conversion rate of 144.7178. Prior to 5:00 p.m., New York City time, on the business day immediately preceding August 15, 2025, such conversion is subject to the satisfaction of certain conditions set forth below.
Holders of the notes who convert their notes in connection with a make-whole fundamental change (as defined in the Indenture) or in connection with any optional redemption are, under certain circumstances, entitled to an increase in the conversion rate. Additionally, in the event of a fundamental change (as defined in the Indenture), holders of the notes may require the Company to repurchase all or a portion of their notes at a price equal to 100% of the principal amount of notes, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.
Holders of the notes may convert all or a portion of their notes at their option prior to 5:00 p.m., New York City time, on the business day immediately preceding August 15, 2025, in multiples of $1,000 principal amount, only under the following circumstances:
•during any calendar quarter commencing after the calendar quarter ending on March 31, 2021 (and only during such calendar quarter), if the last reported sale price of common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price of the notes on each applicable trading day;
•during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the notes for each day of that five day consecutive trading day period was less than 98% of the product of the last reported sale price of common stock and the conversion rate of the notes on such trading day;
•if the Company calls any or all of the notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or
•upon the occurrence of specified corporate events.
On or after August 15, 2025, a holder of the notes may convert all or any portion of its notes at any time prior to 5:00 p.m., New York City time, on the second scheduled trading day immediately preceding the maturity date regardless of the foregoing conditions.
A copy of the Indenture is attached hereto as Exhibit 4.1 and is incorporated herein by reference. The description of the notes contained in this Form 8-K is qualified in its entirety by reference to the Indenture.
Capped Call Transactions
On November 19, 2020, in connection with the pricing of the notes, and on November 23, 2020, in connection with the full exercise by the Initial Purchasers of their option to purchase additional notes pursuant to the Purchase Agreement, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with one or more financial institutions (the “Capped Call Counterparties”). The Capped Call Transactions initially cover, subject to anti-dilution adjustments substantially similar to those applicable to the notes, the number of shares of common stock underlying the notes. The Capped Call Transactions are expected generally to reduce the potential dilution to holders of common stock upon conversion of the notes and/or
offset the potential cash payments that the Company could be required to make in excess of the principal amount of any converted notes upon conversion thereof, with such reduction and/or offset subject to a cap.
In connection with establishing their initial hedge of the Capped Call Transactions, the Capped Call Counterparties have advised the Company that they and/or their respective affiliates expect to purchase shares of common stock and/or enter into various derivative transactions with respect to common stock concurrently with, or shortly after, the pricing of the notes. This activity could contribute to the expected increase (or reduce the size of any decrease in) in the market price of common stock or the notes at that time.
In addition, the Capped Call Counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to common stock and/or purchasing or selling 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 an repurchase of notes by the Company on any fundamental change repurchase date or otherwise). This activity could also cause or avoid an increase or a decrease in the market price of 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 the notes, it could affect the number of shares and value of the consideration that noteholders will receive upon conversion of such notes.
The Capped Call Transactions are separate transactions entered into by the Company with the Capped Call Counterparties, are not part of the terms of the notes, and will not change any holder’s rights under the notes. Holders of the notes will not have any rights with respect to the Capped Call Transactions.
The forms of the base capped call transaction confirmation (the “Base Capped Call Confirmation”) and the additional capped call transaction confirmation (the “Additional Capped Call Confirmation”) are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and are incorporated by reference. The descriptions of the Base Capped Call Confirmation and the Additional Capped Call Confirmation contained in this Form 8-K are qualified in their entirety by reference to Exhibit 99.1 and Exhibit 99.2, respectively.
Repurchase of 2022 Notes
On November 24, 2020, the Company repurchased $50.0 million aggregate principal amount, including accrued interest, of the 2022 notes, which reduced the outstanding principal amount of the 2022 notes from $175.0 million to $125.0 million. The repurchase of the 2022 notes and any associated hedging by holders could have affected the market price of the common stock concurrently with the pricing of the notes, and could have also resulted in higher effective conversion prices for the notes.