The RealReal, Inc. (Nasdaq: REAL), the world’s largest online
marketplace for authenticated, consigned luxury goods, today
announced the pricing of its offering of $150.0 million in
aggregate principal amount of its 3.00
%
Convertible Senior Notes due 2025 (the “notes”) in a private
offering to qualified institutional buyers pursuant to Rule 144A
under the Securities Act of 1933, as amended (the “Securities
Act”). The aggregate principal amount of the offering was increased
from the previously announced offering size of $125.0 million. In
connection with the offering, the Company granted the initial
purchasers a 13-day option to purchase up to an additional $22.5
million in aggregate principal amount of notes. The offering is
expected to close on June 15, 2020, subject to customary closing
conditions.
The notes will be convertible into cash, shares
of the Company’s common stock or a combination of cash and shares
of the Company’s common stock, at the Company’s election, at an
initial conversion rate of 56.2635 shares of the Company’s common
stock per $1,000 principal amount of the notes, which is equivalent
to an initial conversion price of approximately $17.77 per share of
the Company’s common stock. The initial conversion price of the
notes represents a premium of approximately 27.5% over the $13.94
closing price of the Company’s common stock on June 10, 2020.
In connection with the pricing of the notes, the
Company has entered into privately negotiated capped call
transactions, with certain of the initial purchasers or their
affiliates (the “hedge counterparties”). The capped call
transactions will cover, subject to anti-dilution adjustments, the
number of shares of common stock underlying the notes sold in the
offering. The capped call transactions are generally expected to
reduce potential dilution to the Company’s common stock upon any
conversion of notes and/or offset any cash payments the Company 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 $27.88 per share, which represents a
premium of 100.0% over the closing price of the Company’s common
stock of $13.94 per share on June 10, 2020, and is subject to
certain adjustments under the terms of the capped call
transactions.
The Company estimates that the net proceeds from
the offering will be $144.1 million (or $165.8 million if the
initial purchasers exercise their option to purchase additional
notes in full), after deducting the initial purchasers’ discounts
and commissions and estimated offering expenses. The Company
intends to use the net proceeds from the offering of the notes to
fund the cost of entering into the capped call transactions
described above. The Company intends to use the remainder of the
net proceeds for general corporate purposes. If the initial
purchasers exercise their option to purchase additional notes, the
Company intends to use a portion of the additional net proceeds to
fund the cost of entering into additional capped call transactions,
and the remainder of any such net proceeds for general corporate
purposes.
The notes will be senior unsecured obligations
of the Company and will accrue interest at a rate of 3.00% per
annum, 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, 2025, unless earlier converted, redeemed, or
repurchased. The notes will not be redeemable prior to June 20,
2023. The Company may redeem all or any portion of the notes, at
the Company’s option, on or after June 20, 2023 if the last
reported sale price of the Company’s common stock exceeds 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 the Company provides notice of
redemption, during any 30 consecutive trading day period ending on,
and including, the trading day immediately before the date the
Company sends the related redemption notice.
Prior to March 15, 2025, the notes will be
convertible at the option of the holders only upon the satisfaction
of certain conditions and during certain periods. On and after
March 15, 2025, until the close of business on the scheduled
trading day immediately preceding the maturity date, the notes will
be convertible at the option of the holders at any time regardless
of these conditions. If the Company undergoes a fundamental change
(as defined in the indenture governing the notes), holders may
require the Company to repurchase for cash all or any portion of
their notes at a repurchase price equal to 100% of the principal
amount of the notes to be repurchased, plus accrued and unpaid
interest to, but excluding, the fundamental change repurchase date.
In addition, following certain corporate events that occur prior to
the maturity date or if the Company delivers a notice of
redemption, the Company will increase, in certain circumstances,
the conversion rate for a holder who elects to convert its notes in
connection with such a corporate event or notice of redemption, as
the case may be.
In connection with establishing their initial
hedges of the capped call transactions, the counterparties or their
respective affiliates may enter into various derivative
transactions with respect to the Company’s common stock
concurrently with or shortly after the pricing of the notes,
including with certain investors in the notes. This activity could
increase (or reduce the size of any decrease in) the market price
of the Company’s common stock or the trading price of the notes at
that time.
In addition, the counterparties or their
respective affiliates may modify their hedge positions by entering
into or unwinding various derivatives with respect to the Company’s
common stock and/or purchasing or selling the Company’s common
stock or other securities of the Company in secondary market
transactions following the pricing of the notes and prior to the
maturity of the notes (and are likely to do so on each exercise
date of the capped call transactions, which are schedule to occur
during the observation period relating to any conversion of the
notes on or after March 15, 2025, or following any termination of
any portion of the capped call transactions in connection with any
repurchase, redemption or early conversion of the notes or
otherwise). This activity could also cause or prevent an increase
or decrease in the market price of the Company’s common stock or
the trading price of the notes, which could affect the note
holders’ 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 the note holder will receive upon
conversion of the notes.
The notes and any shares of common stock
issuable upon conversion of the notes will be offered to qualified
institutional buyers pursuant to Rule 144A under the Securities
Act. The offer and sale of the notes and any shares of common stock
potentially issuable upon conversion of the notes will not be
registered under the Securities Act or the securities laws of any
other jurisdiction. Neither the notes nor the shares of common
stock potentially issuable upon conversion of the notes may be
offered or sold in the United States absent registration or an
applicable exemption from the registration requirements of the
Securities Act.
This press release does not constitute an offer
to sell, nor is it a solicitation of an offer to buy, these
securities, nor shall there be any sale of these securities in any
state or jurisdiction in which such an offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any state or any jurisdiction.
IR ContactPaul BieberHead of
Investor Relationspaul.bieber@therealreal.com
Press ContactErin SantyHead of
Communicationspr@therealreal.com
Forward Looking Statements
This news release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. Statements regarding whether the Company will
issue the notes, whether the capped call transactions will become
effective the extent, and potential effects, of the capped call
transactions, and the expected use of the proceeds from the sale of
the notes, and other statements contained in this press release
that are not historical fact; and any statements using the terms
“believe,” “expect,” “intend,” “outlook,” “future,” “anticipate,”
“will,” “could,” “estimate,” “guidance,” or similar statements are
forward-looking statements that involve risks and uncertainties
that could cause the company’s actual results to differ materially
from those anticipated. While forward-looking statements are based
on assumptions and analyses made by us that we believe to be
reasonable under the circumstances whether actual results and
developments will meet our expectations and predictions depend on a
number of risks and uncertainties which could cause our actual
results, performance, and financial condition to differ materially
from our expectations.
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