Slack Technologies, Inc. (NYSE: WORK) announced today the
pricing of $750.0 million aggregate principal amount of 0.50%
convertible senior notes due 2025 (the “notes”) in a private
offering (the “offering”) only to persons reasonably believed to be
qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933, as amended (the “Securities Act”). The
offering was upsized from the previously announced offering of
$600.0 million aggregate principal amount of notes. In connection
with the offering, Slack granted the initial purchasers an option
to purchase up to an additional $112.5 million aggregate principal
amount of notes. The sale is expected to close on April 9, 2020,
subject to customary closing conditions.
The notes will bear interest at a rate of 0.50% per year,
payable semi-annually in arrears on April 15 and October 15 of each
year, beginning October 15, 2020. The notes will mature on April
15, 2025, unless earlier converted, repurchased or redeemed in
accordance with their terms. Prior to January 15, 2025, the notes
will be convertible only upon satisfaction of certain conditions
and during certain periods. On or after January 15, 2025, the notes
will be convertible at any time until the close of business on the
second scheduled trading day immediately preceding the maturity
date.
Slack may not redeem the notes prior to April 20, 2023. On or
after April 20, 2023 and on or before the 21st scheduled trading
day immediately before the maturity date, Slack may redeem for cash
all or any portion of the notes if the last reported sale price of
Slack’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 Slack provides notice of redemption,
during any 30 consecutive trading day period ending on, and
including, the trading day immediately preceding the date on which
Slack provides notice of redemption. The redemption price will
equal 100% of the principal amount of the notes being redeemed,
plus accrued and unpaid interest to, but excluding, the redemption
date. No sinking fund is provided for the notes.
The notes will be convertible at the option of holders, subject
to certain conditions and during certain periods, into cash, shares
of Slack’s Class A common stock or a combination of cash and shares
of Slack’s Class A common stock, with the form of consideration
determined at Slack’s election. Holders of the notes will have the
right to require Slack to repurchase all or a portion of their
notes at 100% of their principal amount, plus any accrued and
unpaid interest, upon the occurrence of certain events. The
conversion rate will initially be 32.2630 shares of Slack’s Class A
common stock per $1,000 principal amount of notes (which is
equivalent to an initial conversion price of approximately $31.00
per share of Slack’s Class A common stock). The initial conversion
price of the notes represents a premium of approximately 27.5% over
the last reported sale price of Slack’s Class A common stock of
$24.31 per share on April 6, 2020.
When issued, the notes will be Slack’s senior unsecured
obligations and will rank senior in right of payment to any of
Slack’s indebtedness that is expressly subordinated in right of
payment to the notes; equal in right of payment to any of Slack’s
liabilities that are not so subordinated; effectively junior in
right of payment to any of Slack’s secured indebtedness to the
extent of the value of the assets securing such indebtedness; and
structurally junior to all indebtedness and other liabilities
(including trade payables) of Slack’s subsidiaries.
In connection with the pricing of the notes, Slack entered into
capped call transactions with certain of the initial purchasers
and/or their respective affiliates and other financial institutions
(the “option counterparties”). These capped call transactions are
expected generally to reduce the potential dilution to Slack’s
Class A common stock upon any conversion of the notes and/or offset
any cash payments Slack is required to make in excess of the
principal amount of converted notes, as the case may be, with such
reduction of potential dilution and/or offset of cash payments
subject to a cap. The cap price of the capped call transactions
will initially be $48.62 per share, which represents a premium of
100% over the last reported sale price of Slack’s Class A common
stock of $24.31 per share on April 6, 2020, and is subject to
certain adjustments under the terms of the capped call
transactions.
Slack has been advised that, in connection with establishing
their initial hedges of the capped call transactions, the option
counterparties and/or their respective affiliates expect to enter
into various derivative transactions with respect to Slack’s Class
A common stock concurrently with or shortly after the pricing of
the notes and/or purchase shares of Slack’s 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 Slack’s 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 Slack’s Class A
common stock and/or purchasing or selling Slack’s Class A common
stock or other securities of Slack in secondary market transactions
from time to time prior to maturity of the notes (and are likely to
do so following any conversion of the notes, any repurchase of the
notes by Slack on any fundamental change repurchase date, any
redemption date, or any other date on which the notes are retired
by Slack, in each case, if Slack exercises its option to terminate
the relevant portion of the capped call transactions). This
activity could also cause or avoid an increase or a decrease in the
market price of Slack’s Class A common stock or the notes, which
could affect the ability of holders 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 of Slack’s Class A common stock, if any, and value of the
consideration that holders will receive upon conversion of the
notes.
Further, if any such capped call transactions fail to become
effective, whether or not the offering of notes is completed, the
option counterparties and/or their respective affiliates may unwind
their hedge positions with respect to Slack’s Class A common stock,
which could adversely affect the value of Slack’s Class A common
stock and, if the notes have been issued, the value of the
notes.
Slack estimates that the net proceeds from the offering of notes
will be approximately $731.4 million (or approximately $841.3
million if the initial purchasers exercise their option to purchase
additional notes in full), after deducting the initial purchasers’
discounts and estimated offering expenses payable by Slack. Slack
intends to use approximately $91.8 million of the net proceeds from
the offering of notes to pay the cost of the capped call
transactions. If the initial purchasers exercise their option to
purchase additional notes in full, Slack intends to use
approximately $13.8 million of the net proceeds from the sale of
the additional notes to enter into additional capped call
transactions with the option counterparties. Slack intends to use
the remaining net proceeds from the offering of notes for working
capital and other general corporate purposes, which may include
potential acquisitions and strategic transactions. From time to
time, Slack evaluates potential acquisitions and strategic
transactions of businesses, technologies or products. However,
Slack has not designated any specific uses and has no current
agreements with respect to any material acquisition or strategic
transaction. These intentions are subject to change.
The notes will be sold only to persons reasonably believed to be
qualified institutional buyers pursuant to Rule 144A under the
Securities Act. The notes and the Class A common stock, if any,
issuable upon conversion of the notes are not being registered
under the Securities Act, or the securities laws of any other
jurisdiction. The notes and the Class A common stock issuable upon
conversion of the notes, if any, may not be offered or sold in the
United States except in transactions exempt from, or not subject
to, the registration requirements of the Securities Act and any
applicable state securities laws.
This press release does not constitute an offer to sell or a
solicitation of an offer to buy the securities described herein,
nor shall there be any sale of these securities in any state or
jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of such jurisdiction.
About Slack
Slack has transformed business communication. It’s the leading
channel-based messaging platform, used by millions to align their
teams, unify their systems, and drive their businesses forward.
Only Slack offers a secure, enterprise-grade environment that can
scale with the largest companies in the world. It is a new layer of
the business technology stack where people can work together more
effectively, connect all their other software tools and services,
and find the information they need to do their best work. Slack is
where work happens.
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 relating to: whether Slack will issue the notes; the
anticipated use of the net proceeds from the offering; and
expectations regarding the effect of the capped call transactions
and regarding actions of the option counterparties and their
respective affiliates. These forward-looking statements are made as
of the date they were first issued and were based on current
expectations, estimates, forecasts and projections as well as the
beliefs and assumptions of management. Words such as “guidance,”
“expect,” “anticipate,” “should,” “believe,” “hope,” “target,”
“project,” “plan,” “goals,” “estimate,” “potential,” “predict,”
“may,” “will,” “might,” “could,” “intend,” “shall” and variations
of these terms or the negative of these terms and similar
expressions are intended to identify these forward-looking
statements. Forward-looking statements are subject to a number of
risks and uncertainties, many of which involve factors or
circumstances that are beyond Slack’s control. Slack’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 detailed in Slack’s Annual Report on Form
10-K for the fiscal year ended January 31, 2020. In particular, the
following factors, among others, could cause results to differ
materially from those expressed or implied by such forward-looking
statements: (i) changes as a result of market conditions or for
other reasons, and (ii) the impact of general economic, public
health, industry or political conditions in the United States or
internationally. All information provided in this press release is
as of the date hereof, and Slack undertakes no duty to update or
revise this information unless required by law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200406005905/en/
Jesse Hulsing Investor Relations ir@slack.com
Karesha McGee Media Relations pr@slack.com
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