Medallia, Inc. (“Medallia”) (NYSE:MDLA) today announced the
pricing of $500 million aggregate principal amount of Convertible
Senior Notes due 2025 (the “notes”) in a private offering (the
“offering”) to persons reasonably believed to be qualified
institutional buyers pursuant to Rule 144A under the Securities Act
of 1933, as amended (the “Securities Act”). Medallia also granted
the initial purchasers of the notes a 13-day option to purchase up
to an additional $75 million aggregate principal amount of the
notes. The sale of the notes to the initial purchasers is expected
to settle on September 18, 2020, subject to customary closing
conditions, and is expected to result in $485.3 million in net
proceeds to Medallia after deducting the initial purchasers’
discount and estimated offering expenses payable by Medallia
(assuming no exercise of the initial purchasers’ option to purchase
additional notes).
The notes will be senior, unsecured obligations of Medallia. The
notes will bear interest at a rate of 0.125% per year. Interest
will be payable semi-annually in arrears on March 15 and September
15 of each year, beginning on March 15, 2021. The notes will mature
on September 15, 2025, unless earlier redeemed, repurchased or
converted. Medallia may not redeem the notes prior to September 20,
2023. Medallia may redeem for cash all or any portion of the notes,
at its option, on or after September 20, 2023, if the last reported
sale price of Medallia’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), during any 30 consecutive trading day
period (including the last trading day of such period) ending on
and including the trading day preceding the date on which Medallia
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
Medallia is not required to redeem or retire the notes
periodically.
Holders of the notes will have the right to require Medallia 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. In connection with certain
corporate events or if the Company calls any notes for redemption,
the Company will, under certain circumstances, increase the
conversion rate for noteholders who elect to convert their notes in
connection with any such corporate event or convert their notes
called for redemption (unless Medallia permits all notes to convert
in connection with any partial redemption).
The notes will be convertible at an initial conversion rate of
25.4113 shares of Medallia’s common stock, per $1,000 principal
amount of notes (equivalent to an initial conversion price of
approximately $39.35 per share, which represents a conversion
premium of approximately 35.0% to the last reported sale price of
$29.15 per share of Medallia’s common stock on The New York Stock
Exchange on September 15, 2020).
Prior to the close of business on the business day immediately
preceding June 15, 2025, 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 June 15, 2025
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 Medallia’s common stock, or a combination thereof, at
Medallia’s election.
In connection with the pricing of the notes, Medallia entered
into privately negotiated capped call transactions with certain of
the initial purchasers or their respective affiliates and other
financial institutions (the “option 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 expected generally
to reduce potential dilution to Medallia’s common stock upon any
conversion of notes and/or offset any cash payments Medallia 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 $58.30 per share, which represents a premium of
100% over the last reported sale price of Medallia’s common stock
of $29.15 per share on The New York Stock Exchange on September 15,
2020, and is subject to certain adjustments under the terms of the
capped call transactions.
Medallia 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 Medallia’s common stock and/or enter into various
derivative transactions with respect to the 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 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 common stock and/or
purchasing or selling the common stock or other securities of
Medallia 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
Medallia 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 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.
Medallia intends to use $53.8 million of the net proceeds from
the offering to pay the cost of the capped call transactions
described above. If the initial purchasers exercise their option to
purchase additional notes, Medallia 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.
Medallia intends to use the remainder of the net proceeds of the
offering for general corporate purposes, which may include working
capital, capital expenditures, and potential acquisitions and
strategic transactions. However, it has not designated any specific
uses for such remainder of the net proceeds and has no current
agreements with respect to any material acquisition or strategic
transactions.
The notes are being offered only to persons reasonably believed
to be qualified institutional buyers pursuant to Rule 144A under
the Securities Act. Neither the notes nor the shares of Medallia’s
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 securities and shall not constitute an
offer, solicitation or sale in any jurisdiction in which such
offer, solicitation or sale is unlawful.
Forward-Looking Statements
This press release includes “forward-looking statements,”
including, but not limited to, whether Medallia will be able to
consummate the offering, the final terms of the offering and the
capped call transactions, prevailing market conditions, the
anticipated use of net proceeds of the offering of the notes.
Forward-looking statements are subject to known and unknown risks
and uncertainties, and are based on assumptions that may prove to
be incorrect, which could cause actual results to differ materially
from those expected or implied by the forward-looking statements.
All forward-looking statements are subject to other risks detailed
in our Quarterly Report on Form 10-Q for the quarter ended July 31,
2020, filed with the Securities and Exchange Commission, and in
other filings we make with the Securities and Exchange Commission
from time to time. All forward-looking statements in this press
release are based on information available to Medallia as of the
date hereof, and we undertake no obligation to update these
forward-looking statements, except as required by law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200915006371/en/
Investor Relations: Carolyn Bass ir@medallia.com
PR Contact: Valerie Beaudett press@medallia.com +1 (650)
400-7833
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