Zscaler, Inc. (ZS), a cloud security company, on Tuesday announced that it has priced a private offering of $1.5 billion worth of 0.00% convertible senior notes due 2028. The offering is set to close on July 3. The company has also entered into capped call transactions with certain initial buyers and financial institutions.
The company expects to raise about $1.48 billion in net proceeds from the offering, or up to $1.70 billion if the full additional allotment is purchased. After deducting fees and expenses, the company plans to use $171 million to fund capped call transactions.
The remaining funds will be used for general corporate purposes, including working capital, capital spending, and potential acquisitions or strategic deals.
The company also gave the initial buyers a 13-day option to purchase up to an additional $225 million in notes.
The notes will be senior unsecured debt of the company and may not pay regular interest or increase in value over time. They will mature on July 15, 2028, unless converted or repurchased earlier.
Investors can initially convert each $1,000 note into 2.2752 shares of the company stock, reflecting a conversion price of about $439.52 per share, around 40% above the company's closing stock price on June 30.
The company has also entered into capped call transactions with certain initial buyers and financial institutions. These agreements cover the same number of shares initially underlying the notes and include anti-dilution adjustments similar to those on the notes.
The cap price is initially set at $784.85 per share 150% above the company's closing stock price on June 30. If more notes are sold through the option, the company plans to enter additional capped call deals.
Zscaler closed trading 0.44% lesser at $313.94 on the Nasdaq. In the after-hours trading, 0.15% higher at $314.42.
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