SoFi (NASDAQ:SOFI) stock is taking a tumble after the company announced a private offering of $750 million in convertible senior notes due in 2029. The initial purchasers of the note, which are limited to qualified institutional investors, will have an option to purchase an additional $112.5 million of the notes.
“The notes will be unsecured, unsubordinated obligations of SoFi, will accrue interest payable semi-annually in arrears and will mature on March 15, 2029, unless earlier repurchased, redeemed or converted,” explained SoFi. “Noteholders will have the right to convert their notes in certain circumstances into cash and, if applicable, shares of SoFi’s common stock.”
SoFi will also have the option to redeem the notes in cash on or after March 15, 2027 if SOFI stock is valued at higher than 130% of the conversion price for a specified period of time while meeting specific liquidity conditions.
SOFI Stock: SoFi Announces $750 Million Convertible Note Offering
The personal finance company will use the proceeds from the offering for four purposes. The first is entering into one or more capped call transactions with one or more purchasers or the notes, an affiliate of the note-purchaser or an institutional investor. SoFi expects these call transactions to cover the number of shares underlying the notes purchased. The purpose of these transactions is to reduce the effect of dilution upon the conversion of the note “and/or offset any potential cash payments SoFi is required to make in excess of the principal amount of converted notes.”
The note proceeds will also be used toward paying the fees for the offering, redeeming its 12.5% Series 1 preferred stock and for other general corporate purposes, such as paying off debt. The potential proceeds from the additional $112.5 million in notes will be used for capped call transactions.
SoFi also disclosed that, before the offering, it had entered into exchange agreements with the holders of its 0% convertible senior notes due in 2026. SoFi agreed to exchange $600 million of the notes for approximately 61.71 million shares of SOFI stock. Following the completion of this exchange, the company may repurchase or enter into additional exchange agreements for its 2026 notes.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
