Robinhood convertible notes are at the center of a new $2.0 billion private offering that Robinhood Markets announced on June 22. The company said it will sell convertible senior notes due 2029. It plans to use the proceeds for share repurchases, capped call deals, and general corporate growth.
Robinhood said it will offer the notes only to qualified institutional buyers under Rule 144A of the Securities Act of 1933. Additionally, initial purchasers can buy up to $200 million more in notes. They can use that option within 13 days of the first issuance date.
Robinhood Convertible Notes Terms
The notes are senior and unsecured, and they will mature on October 1, 2029. Robinhood said it cannot redeem the notes before July 1, 2028, except in certain cleanup redemption cases. After that date, however, redemption can happen if Robinhood’s Class A common stock trades at least 120% of the applicable conversion price during a qualifying trading period.
Robinhood said it expects to use about $300 million of the net proceeds to buy back Class A common stock. However, the final amount may change. The company also plans to use part of the proceeds for capped call transactions.
Use of Proceeds and Capped Calls
Robinhood said those capped call transactions aim to limit shareholder dilution until at least a 125% premium to the share price on the pricing date. In addition, the company will enter into those transactions with financial institutions in connection with the offering. The rest of the proceeds will go to general corporate purposes.
Those uses may include organic growth investments, acquisitions, and capital spending. Meanwhile, Robinhood said the interest rate, initial conversion rate, and other main pricing terms will be set when the offering is priced.
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