Okta, Inc. (“Okta”) (NASDAQ:OKTA) today announced the pricing of
$1.0 billion aggregate principal amount of Convertible Senior Notes
due 2026 (the “notes”) in a private offering (the “offering”) to
qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933, as amended (the “Securities Act”). Okta
also granted the initial purchasers of the notes the option to
purchase, within a 13-day period from, and including, the initial
issuance date of the notes, up to an additional $150.0 million
aggregate principal amount of the notes. The sale of the notes to
the initial purchasers is expected to settle on June 12, 2020,
subject to customary closing conditions, and is expected to result
in approximately $986.8 million in net proceeds to Okta after
deducting the initial purchasers’ discount and estimated offering
expenses payable by Okta (assuming no exercise of the initial
purchasers’ option to purchase additional notes).
The notes will be senior, unsecured obligations of Okta. The
notes will bear interest at a rate of 0.375% per year. Interest
will be payable semi-annually in arrears on June 15 and December 15
of each year, beginning on December 15, 2020. The notes will mature
on June 15, 2026, unless earlier redeemed, repurchased or
converted. Okta may not redeem the notes prior to June 20, 2023.
Okta may redeem for cash all or any portion of the notes, at its
option, on or after June 20, 2023, if the last reported sale price
of Okta’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), including the trading day immediately
preceding the date on which Okta provides notice of redemption,
during any 30 consecutive trading day period ending on and
including the trading day preceding the date on which Okta 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, which means that Okta is not
required to redeem or retire the notes periodically.
Holders of the notes will have the right to require Okta to
repurchase all or a portion of their notes upon the occurrence of a
fundamental change (as defined in the indenture governing the
notes) at a purchase price of 100% of their principal amount plus
any accrued and unpaid interest.
The notes will be convertible at an initial conversion rate of
4.1912 shares of Okta’s Class A common stock, per $1,000 principal
amount of notes (equivalent to an initial conversion price of
approximately $238.60 per share, which represents a conversion
premium of approximately 32.50% to the last reported sale price of
$180.07 per share of Okta’s Class A common stock on NASDAQ on June
9, 2020).
Prior to the close of business on the business day immediately
preceding March 15, 2026, 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 March 15, 2026
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 Okta’s Class A common stock, or a combination thereof, at
Okta’s election.
In connection with the pricing of the notes, Okta entered into
privately negotiated capped call transactions with one of the
initial purchasers and certain other financial institutions (the
“option counterparties”). The capped call transactions will cover,
subject to anti-dilution adjustments, the number of shares of Class
A common stock underlying the notes sold in the offering. The
capped call transactions are generally expected to reduce potential
dilution to Okta’s Class A common stock upon any conversion of
notes and/or offset any cash payments Okta is required to make in
excess of the principal amount of converted notes, as the case may
be, with such reduction and/or offset subject to a cap. The cap
price of the capped call transactions will initially be $360.14 per
share, which represents a premium of 100% over the last reported
sale price of Okta’s Class A common stock of $180.07 per share on
June 9, 2020, and is subject to certain adjustments under the terms
of the capped call transactions.
Okta has been advised that, in connection with establishing
their initial hedges of the capped call transactions, the option
counterparties or their respective affiliates expect to purchase
shares of Okta’s 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 purchasing or selling the Class A common stock or
other securities of Okta in secondary market transactions from time
to time prior to the maturity of the notes (and are likely to do so
following any conversion, repurchase or redemption of the notes, to
the extent Okta exercises the relevant election under the capped
call transactions). 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
following a conversion or during any observation period related to
a conversion of notes, it could affect the number of shares and
value of the consideration that noteholders will receive upon
conversion of the notes.
Okta intends to use approximately $116.5 million of the net
proceeds from the offering to pay the cost of the capped call
transactions. If the initial purchasers exercise their option to
purchase additional notes, Okta expects to use a portion of the net
proceeds from the sale of such additional notes to enter into
additional capped call transactions with the option counterparties.
Okta intends to use the remainder of the net proceeds from the
offering for general corporate purposes.
Contemporaneously with the pricing of the offering, Okta entered
into privately negotiated transactions with certain holders of its
existing 0.25% Convertible Senior Notes due 2023 (the “2023 Notes”)
to exchange approximately $69.9 million in aggregate principal
amount of the 2023 Notes for an aggregate of approximately 1.4
million shares of its Class A common stock and approximately $0.2
million in cash in respect of accrued and unpaid interest and
premium to the conversion value of the 2023 Notes. Okta expects
that holders of 2023 Notes that exchange their 2023 Notes may enter
into or unwind various derivatives with respect to Okta’s Class A
common stock (including entering into derivatives with one or more
of the initial purchasers or their respective affiliates) and/or
purchase or sell shares of Okta’s Class A common stock concurrently
with or shortly after the pricing of the notes.
In connection with the issuance of the 2023 Notes, Okta entered
into convertible note hedge transactions (the “existing convertible
note hedge transactions”) with certain financial institutions (the
“existing counterparties”). Okta also entered into separate warrant
transactions (the “existing warrant transactions”) with the
existing counterparties. In connection with the exchange
transactions with respect to the 2023 Notes, Okta entered into
agreements with the existing counterparties to terminate a portion
of: (i) the existing convertible note hedge transactions in a
notional amount corresponding to the principal amount of such 2023
Notes exchanged and (ii) the existing warrant transactions with
respect to a number of shares equal to the notional shares
underlying such 2023 Notes exchanged. In connection with such
terminations and the related unwinding of the existing hedge
position of the existing counterparties with respect to such
transactions, such existing counterparties and/or their respective
affiliates may sell shares of Okta’s Class A common stock in
secondary market transactions, and/or unwind various derivative
transactions with respect to the Class A common stock concurrently
with or shortly after the pricing of the notes.
In connection with such terminations, Okta anticipates that it
will receive net proceeds from the existing counterparties equal to
approximately $19.6 million, which it intends to use for general
corporate purposes. The exchange of Okta’s 2023 Notes and the
unwind of the existing convertible note hedge transactions and the
existing warrant transactions described above, and the potential
related market activities by exchanging holders of the 2023 Notes
and the existing counterparties, as applicable, could increase (or
reduce the size of any decrease in) or decrease (or reduce the size
of any increase in) the market price of Okta’s Class A common
stock, which may affect the trading price of the notes, at that
time and Okta cannot predict the magnitude of such market activity
or the overall effect it will have on the price of the notes or its
Class A common stock.
The notes were only offered to qualified institutional buyers
pursuant to Rule 144A under the Securities Act. Neither the notes
nor the shares of Okta’s Class A common stock potentially issuable
upon conversion of the notes, if any, have been, or will be,
registered under the Securities 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 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.
About Okta
Okta is the leading independent provider of identity for the
enterprise. The Okta Identity Cloud enables organizations to
securely connect the right people to the right technologies at the
right time. With over 6,500 pre-built integrations to applications
and infrastructure providers, Okta customers can easily and
securely use the best technologies for their business. Over 8,400
organizations, including Engie, JetBlue, Nordstrom, Takeda
Pharmaceutical, Teach for America, T-Mobile and Twilio, trust Okta
to help protect the identities of their workforces and
customers.
Cautionary Language Concerning Forward-Looking
Statements
This press release contains “forward-looking statements” within
the meaning of the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995, including but not limited
to, statements regarding whether Okta will issue the notes, the
extent, and potential effects, of the capped call transactions and
the exchange of the 2023 Notes (including the unwind of the
existing convertible note hedge transactions and existing warrant
transactions), whether the capped call transactions will become
effective, the potential dilution to Okta’s Class A common stock,
the expected use of the proceeds from the sale of the notes, and
other statements contained in this press release that are not
historical facts. These forward-looking statements are based on
current expectations, estimates, forecasts and projections. Words
such as “expect,” “anticipate,” “should,” “believe,” “hope,”
“target,” “project,” “goals,” “estimate,” “potential,” “predict,”
“may,” “will,” “might,” “could,” “intend,” “shall” and variations
of these terms and similar expressions are intended to identify
these forward-looking statements, although not all forward-looking
statements contain these identifying words. Forward-looking
statements are subject to a number of risks and uncertainties, many
of which involve factors or circumstances that are beyond Okta’s
control. Okta’s actual results could differ materially from those
stated or implied in forward-looking statements due to a number of
factors, including but not limited to, risks related to or
associated with: whether Okta will consummate the offering of notes
on the expected terms, or at all, whether Okta will consummate the
anticipated 2023 Notes exchanges, the related terminations of a
portion of the existing convertible note hedge transactions and the
existing warrant transactions and the terms thereof and whether
Okta will enter into capped call transactions, the terms thereof
and whether such capped call transactions become effective, all of
which could differ or change based upon market conditions or for
other reasons; and other risks included in Okta’s most recent
Annual Report on Form 10-K and Quarterly Report on Form 10-Q and
its other filings with the Securities and Exchange Commission. The
forward-looking statements included in this press release represent
Okta’s views only as of the date of this press release and Okta
assumes no obligation and does not intend to update these
forward-looking statements.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200610005234/en/
Investor Contact: Dave Gennarelli 415-851-4744 investor@okta.com
or Media Contact: Jenna Kozel 415-418-9600 press@okta.com
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