InterDigital, Inc. ("InterDigital") (Nasdaq:IDCC) announced today
the pricing of its private offering of $400.0 million aggregate
principal amount of 3.50% Senior Convertible Notes due 2027 (the
“notes”) to be sold to qualified institutional buyers in reliance
on Rule 144A under the Securities Act of 1933, as amended (the
"Act"). The size of the offering was increased from the
previously announced $350 million in aggregate principal amount.
InterDigital has granted the initial purchasers of the notes a
13-day option to purchase up to an additional $60.0 million
aggregate principal amount of notes. The offering is expected to
close on May 27, 2022, subject to certain closing conditions.
Key elements of the transaction today include:
- $400 million 3.50% Senior Convertible Notes due 2027
offering
- Repurchase of approximately $273.8 million aggregate principal
amount of 2.00% Convertible Senior Notes due 2024 issued in 2019
(the “2024 notes”) and unwind of related call spread
- Repurchase of approximately $75.0 million of shares of
InterDigital common stock
The Notes
The notes will be InterDigital's senior unsecured obligations.
The notes will pay interest semi-annually in cash on June 1 and
December 1 at a rate of 3.50% per year, and will mature on June 1,
2027. The holders of the notes will have the ability to require
InterDigital to repurchase all or any portion of their notes for
cash in the event of a fundamental change. In such case, the
repurchase price would be 100% of the principal amount of the notes
being repurchased plus any accrued and unpaid interest.
Prior to March 1, 2027, the notes will be convertible only upon
the occurrence of certain events and during certain periods, and
thereafter, at any time until the second scheduled trading day
preceding the maturity date. The notes will be convertible at an
initial conversion rate of 12.9041 shares of InterDigital common
stock per $1,000 principal amount of the notes, which is equivalent
to an initial conversion price of approximately $77.49, which
represents a 27.5% conversion premium to the closing sale price of
$60.78 per share of InterDigital common stock on the NASDAQ Global
Select Market on May 24, 2022. In addition, following certain
corporate transactions or an optional redemption of the notes, in
each case, that occur prior to the maturity date, InterDigital
will, in certain circumstances, increase the conversion rate for a
holder that elects to convert its notes in connection with such a
corporate transaction or optional redemption. Upon conversion,
InterDigital will pay cash up to the aggregate principal amount of
the notes to be converted, and will pay or deliver, as the case may
be, cash, shares of InterDigital's common stock or a combination
thereof, at InterDigital's election, for any conversion obligation
in excess of the aggregate principal amount being converted.
InterDigital may redeem for cash all or any portion of the
notes, at its option, on or after June 5, 2025 if the last reported
sale price of InterDigital’s 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
preceding the date on which InterDigital provides notice of
redemption, during any 30 consecutive trading day period ending on,
and including, the trading day preceding the date on which
InterDigital provides notice of redemption at a redemption price
equal to 100% of the principal amount of the notes to be redeemed,
plus any accrued and unpaid interest to, but excluding, the
redemption date. No sinking fund is provided for the notes.
Concurrent Convertible Note Hedge and Warrant
Transactions
In connection with the pricing of the notes, InterDigital has
entered into privately negotiated convertible note hedge
transactions with certain financial institutions, some of which are
the initial purchasers of the notes or their affiliates (the "hedge
counterparties"). The convertible note hedge transactions
collectively will cover, subject to customary anti-dilution
adjustments, the aggregate number of shares of InterDigital common
stock that will initially underlie the notes. InterDigital has also
entered into privately negotiated warrant transactions with the
hedge counterparties whereby InterDigital has sold to the hedge
counterparties warrants relating to the same number of shares of
InterDigital common stock, with such number of shares subject to
customary anti-dilution adjustments. The strike price of the
warrant transactions will initially be approximately $106.37 per
share, which represents a 75% premium to the closing sale price of
InterDigital common stock on the NASDAQ Global Select Market on May
24, 2022. In addition, if the initial purchasers exercise their
option to purchase additional notes, InterDigital expects to enter
into one or more additional warrant transactions and to use a
portion of the proceeds from the sale of the additional notes and
warrant transactions to enter into additional convertible note
hedge transactions. The convertible note hedge transactions are
expected to reduce the potential dilution with respect to
InterDigital common stock and/or offset any potential cash payments
InterDigital is required to make in excess of the principal amount
of converted notes, as the case may be, upon any conversion of the
notes in the event that the market price per share of InterDigital
common stock exceeds the strike price of the convertible note hedge
transactions. However, the warrant transactions will have a
dilutive effect to the extent that the market price per share of
InterDigital common stock exceeds the applicable strike price of
the warrants on any expiration date of the warrants.
Concurrent Repurchase of $273.8 Million of Existing
2.00% Convertible Senior Notes due 2024
Concurrently with the offering of the notes, InterDigital
entered into privately negotiated transactions with certain holders
of its 2024 notes to repurchase approximately $273.8 million
aggregate principal of the outstanding 2024 notes for a total
repurchase cost of approximately $285.2 million (the “Note
Repurchase Transaction”).
InterDigital expects that holders of its 2024 notes that are
party to any Note Repurchase Transaction may purchase or sell
shares of its common stock in the market to hedge their exposure in
connection with these transactions. This activity could affect the
market price of InterDigital common stock and could also impact the
initial conversion prices of the notes.
Concurrent Repurchase of Common Stock
Concurrently with the pricing of the offering of the notes,
InterDigital will repurchase approximately $75.0 million of shares
of InterDigital common stock (the “Common Stock Repurchase”) from
institutional investors through one of the initial purchasers or
its affiliate, as InterDigital's agent. The purchase price per
share of the common stock repurchased from such institutional
investors was $60.78 per share, the closing price of the stock on
May 24, 2022. Such Common Stock Repurchase could have increased, or
limited a decline in, the market price of InterDigital’s common
stock, which may have resulted in a higher effective conversion
price of the notes.
Unwind of Existing Convertible Note Hedge and Warrant
Transactions
In connection with the Note Repurchase Transactions,
InterDigital has also entered into agreements with the dealers
party to certain convertible note hedge transactions related to
such 2024 notes (the “Existing Note Hedges”) to unwind a
corresponding portion of the Existing Note Hedges. InterDigital
also entered into agreements with such dealer counterparties to
unwind certain warrant transactions sold at the time of issuance of
the 2024 notes (the “Existing Warrants”).
In connection with establishing their initial hedge of the
convertible note hedge transactions and warrant transactions and
concurrently with, or shortly after, the pricing of the notes, the
hedge counterparties and/or their affiliates expect to purchase
InterDigital common stock in open market transactions and/or
privately negotiated transactions and/or enter into various
cash-settled derivative transactions with respect to InterDigital
common stock. In connection with the unwind of the Existing Note
Hedges and the Existing Warrants, InterDigital expects the
counterparties thereto and/or their affiliates may reduce their
existing hedge positions, which may partially offset the purchases
or cash-settled derivatives transactions described in the foregoing
sentence. In addition, the hedge counterparties and/or their
affiliates may modify their hedge positions following the pricing
of the notes by entering into or unwinding various derivative
transactions with respect to InterDigital common stock and/or by
purchasing or selling InterDigital common stock in open market
transactions and/or privately negotiated transactions following the
pricing of the notes from time to time (and are likely to do so
during any conversion period related to a conversion of notes). Any
of these hedging activities could also increase (or reduce the size
of any decrease in) the market price of InterDigital common
stock.
Use of Proceeds
InterDigital estimates that the net proceeds from the offering
of the notes will be approximately $391 million (or approximately
$450 million if the initial purchasers exercise their option in
full), after deducting the initial purchasers' fees and estimated
offering expenses. In addition, InterDigital expects to receive
proceeds from the sale of the warrants described above.
InterDigital expects to use a portion of the net proceeds from the
offering of the notes and the proceeds from the sale of the
warrants to fund the cost of the convertible note hedge
transactions described above, to fund the Note Repurchase
Transactions described above, and to fund the Common Stock
Repurchase described above. InterDigital intends to use the
remaining net proceeds for general corporate purposes, including,
without limitation, the repurchase, redemption or other retirement
of any remaining 2024 notes.
The notes and the shares of InterDigital common stock issuable
upon conversion, if any, have not been registered under the Act or
applicable state securities laws and may not be offered or sold in
the United States except pursuant to an exemption from the
registration requirements of the Act and applicable state
securities laws.
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy these securities, nor shall there
be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state.
About InterDigital®
InterDigital develops mobile and video technologies that are at
the core of devices, networks, and services worldwide. We solve
many of the industry's most critical and complex technical
challenges, inventing solutions for more efficient broadband
networks, better video delivery, and richer multimedia experiences
years ahead of market deployment. InterDigital has licenses and
strategic relationships with many of the world's leading wireless
companies. Founded in 1972, InterDigital is listed on NASDAQ.
InterDigital is a registered trademark of InterDigital, Inc.
CONTACT: investor.relations@interdigital.com+1 (302)
300-1857
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