Zendesk, Inc. (NYSE: ZEN) (“Zendesk”) today announced its
intention to offer, subject to market conditions and other factors,
$1 billion 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”). Zendesk also expects to grant the initial
purchasers of the Notes an option to purchase up to an additional
$150 million aggregate principal amount of the Notes.
The Notes will be senior, unsecured obligations of Zendesk, and
interest on the Notes will be payable semi-annually in arrears. The
Notes will be convertible into cash, shares of Zendesk’s common
stock or a combination thereof, at Zendesk’s election. The interest
rate, conversion rate and other terms of the Notes are to be
determined upon pricing of the Offering.
In connection with the pricing of the Notes, Zendesk expects to
enter into privately negotiated capped call transactions with one
or more of the initial purchasers of the Notes and/or their
respective affiliates or other financial institutions (the “Option
Counterparties”). The capped call transactions are expected
generally to reduce potential dilution to Zendesk’s common stock
upon any conversion of Notes and/or offset any potential cash
payments Zendesk 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.
Zendesk expects that, in connection with establishing their
initial hedges of the capped call transactions, the Option
Counterparties or their respective affiliates will enter into
various derivative transactions with respect to Zendesk’s common
stock and/or purchase shares of Zendesk’s 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 Zendesk’s common stock or the Notes at that time. In addition,
Zendesk expects that the Option Counterparties or their respective
affiliates may modify their hedge positions by entering into or
unwinding various derivatives with respect to Zendesk’s common
stock and/or by purchasing or selling Zendesk’s common stock or
other securities of Zendesk 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 for the capped
call transactions, which are expected to occur on each trading day
during the 40 trading day period beginning on the 41st scheduled
trading day prior to the maturity date of the Notes, or following
any termination of any portion of the capped call transactions in
connection with any repurchase, redemption or early conversion of
the Notes). This activity could also cause or avoid an increase or
a decrease in the market price of Zendesk’s common stock or the
Notes, which could affect the ability of holders of Notes to
convert the Notes and, to the extent the activity occurs following
a conversion or during any observation period related to a
conversion of the Notes, it could affect the number of shares of
Zendesk’s common stock and value of the consideration that holders
of Notes will receive upon conversion of the Notes.
Zendesk expects to use a portion of the net proceeds of the
Offering to pay the cost of the capped call transactions described
above. If the initial purchasers exercise their option to purchase
additional Notes, Zendesk expects to use a portion of the net
proceeds from the sale of the additional Notes to enter into
additional capped call transactions with the Option Counterparties.
Zendesk also intends to use a portion of the net proceeds from the
Offering to finance the repurchase for cash of up to $460 million
in aggregate principal amount of Zendesk’s 0.25% Convertible Senior
Notes due 2023 (the “2023 Notes”) described below. Zendesk intends
to use the remainder of the net proceeds from the Offering for
working capital or other general corporate purposes, including the
further expansion and development of Zendesk’s customer experience
product and platform solutions, the development of new solutions
and services, continued investment in Zendesk’s sales and marketing
capabilities, and maturation of Zendesk’s international
organization. Zendesk may also use a portion of the net proceeds to
acquire complementary businesses, products, services, or
technologies. However, Zendesk has not entered into any agreements
for any specific acquisitions at this time.
Contemporaneously with the pricing of the Notes in the Offering,
Zendesk expects to enter into one or more separate and individually
negotiated transactions with one or more holders of the 2023 Notes
to repurchase for cash up to $460 million in aggregate principal
amount of the 2023 Notes on terms to be negotiated with each holder
(each, a “Note Repurchase”). The terms of each Note Repurchase are
anticipated to be individually negotiated with each holder of 2023
Notes and will depend on several factors, including the market
price of Zendesk’s common stock and the trading price of the 2023
Notes at the time of each such Note Repurchase. No assurance can be
given as to how much, if any, of these 2023 Notes will be
repurchased or the terms on which they will be repurchased.
Zendesk expects that holders of any 2023 Notes that Zendesk
agrees to repurchase that have hedged their equity price risk with
respect to such 2023 Notes (the “hedged holders”) will,
concurrently with the pricing of the new Notes, unwind their hedge
positions by buying Zendesk’s common stock and/or entering into or
unwinding various derivative transactions with respect to Zendesk’s
common stock. The amount of Zendesk’s common stock to be purchased
by the hedged holders may be substantial in relation to the
historic average daily trading volume of Zendesk’s common
stock.
In connection with the issuance of the 2023 Notes, Zendesk
entered into capped call transactions (the “Existing Capped Call
Transactions”) with certain financial institutions (the “Existing
Option Counterparties”). In connection with the concurrent Note
Repurchases, Zendesk expects to enter into agreements with the
Existing Option Counterparties to terminate a portion of the
Existing Capped Call Transactions in a notional amount
corresponding to the principal amount of the 2023 Notes
repurchased, if any. In connection with any such termination of a
corresponding portion of the Existing Capped Call Transactions,
Zendesk expects that such Existing Option Counterparties and/or
their respective affiliates will sell shares of Zendesk’s common
stock in secondary market transactions, and/or unwind various
derivative transactions with respect to Zendesk’s common stock.
Zendesk anticipates that it will receive cash from the Existing
Option Counterparties, which Zendesk intends to use for general
corporate purposes.
Any repurchase of the 2023 Notes and the termination of a
corresponding portion of the Existing Capped Call Transactions
described above, and the potential related market activities by
holders of the 2023 Notes participating in the concurrent Note
Repurchases 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 Zendesk’s
common stock, which may affect the trading price of the Notes at
that time and the initial conversion price of the Notes. Zendesk
cannot predict the magnitude of such market activity or the overall
effect it will have on the price of the Notes or Zendesk’s common
stock.
The Notes will only be offered to persons reasonably believed to
be qualified institutional buyers pursuant to Rule 144A under the
Securities Act. Neither the Notes nor the shares of Zendesk’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 press release does not constitute an offer to sell or a
solicitation of an offer to buy, nor shall there be any offer or
sale of, the Notes (or any shares of Zendesk’s common stock
issuable upon conversion of the Notes) in any state or jurisdiction
in which the offer, solicitation, or sale of the Notes would be
unlawful prior to the registration or qualification thereof under
the securities laws of any such state or jurisdiction.
About Zendesk
The best customer experiences are built with Zendesk.
Zendesk is a CRM company that builds flexible support, sales,
and customer engagement software that is quick to implement and
scales to meet changing needs. From large enterprises to startups,
we believe that powerful, innovative customer experiences should be
within reach for every company, no matter the size, industry or
ambition. Zendesk serves more than 160,000 customers across a
multitude of industries in over 30 languages. Zendesk is
headquartered in San Francisco, and operates 17 offices
worldwide.
Forward-Looking Statements
This press release contains forward-looking statements,
including, among other things, about the proposed terms of the
Notes, the size of the Offering, including the option to purchase
additional Notes, whether Zendesk will enter into and the extent,
and potential effects of, the capped call transactions, the Note
Repurchases and the terminations of a portion of the Existing
Capped Call Transactions, the potential dilution to Zendesk’s
common stock and the expected use of the net proceeds from the sale
of the Notes and the terminations of a portion of the Existing
Capped Call Transactions. Words such as “may,” “should,” “will,”
“believe,” “expect,” “anticipate,” “target,” “project,” and similar
phrases that denote future expectation or intent are intended to
identify forward-looking statements. You should not rely upon
forward-looking statements as predictions of future events.
The outcome of the events described in these forward-looking
statements is subject to known and unknown risks, uncertainties,
and other factors that may cause actual results, performance, or
achievements to differ materially, including risks related to or
associated with: (i) whether Zendesk will consummate the Offering
on the expected terms, or at all, (ii) whether Zendesk will
consummate the anticipated Note Repurchases, the related
terminations of a portion of the Existing Capped Call Transactions
and the terms thereof and (iii) whether Zendesk 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.
The forward-looking statements contained in this press release
are also subject to additional risks, uncertainties, and factors,
including those more fully described in Zendesk’s filings with the
Securities and Exchange Commission, including its Quarterly Report
on Form 10-Q for the quarter ended March 31, 2020. Further
information on potential risks that could affect actual results
will be included in the subsequent periodic and current reports and
other filings that Zendesk makes with the Securities and Exchange
Commission from time to time, including its Quarterly Report on
Form 10-Q to be filed for the quarter ending June 30, 2020.
Forward-looking statements represent Zendesk’s management’s
beliefs and assumptions only as of the date such statements are
made. Zendesk undertakes no obligation to update any
forward-looking statements made in this press release to reflect
events or circumstances after the date of this press release or to
reflect new information or the occurrence of unanticipated events,
except as required by law.
Source: Zendesk, Inc.
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version on businesswire.com: https://www.businesswire.com/news/home/20200610005836/en/
Zendesk, Inc. Investor Contact: Marc Cabi, +1
415-852-3877 ir@zendesk.com or Media Contact: Paige Young,
+1 415-852-3877 press@zendesk.com
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