The company expects the initial cap price to be at least 150% above Cloudflare's closing share price on the pricing date.
Cloudflare is seeking to raise up to $2.5 billion through convertible debt, announcing plans for a $2.175 billion private offering of senior notes due 2031 along with a $325 million option for additional notes. The transaction is subject to market conditions and other factors.
The notes will be senior unsecured debt and mature in August 2031. They will pay interest twice a year and can be converted into cash, Cloudflare Class A shares or a combination of the two, at the company’s discretion. Key terms, including the interest rate and conversion price, will be set when the offering is priced.
Cloudflare also plans to enter into capped call transactions covering the shares underlying the notes. These derivatives are intended to reduce the potential dilution to existing shareholders if the notes are converted, while also potentially limiting Cloudflare’s cash obligations above the principal amount of the converted notes.
The company expects the initial cap price to be at least 150% above Cloudflare’s closing share price on the pricing date. Cloudflare will use part of the debt proceeds to pay for these capped calls.
The remainder of the capital could be deployed across a range of corporate purposes, including working capital, capital expenditures, debt repayment, acquisitions and strategic investments. If the additional notes are sold, Cloudflare expects to use part of those proceeds for additional capped call transactions.
