Rapid7, Inc. (“Rapid7”) (Nasdaq: RPD) today announced the pricing
of $260.0 million aggregate principal amount of 1.25% convertible
senior notes due 2029 (the “notes”) in a private placement to
persons reasonably believed to be qualified institutional buyers
pursuant to Rule 144A under the Securities Act of 1933, as amended
(the “Securities Act”). The aggregate principal amount of the
offering was increased from the previously announced offering size
of $250.0 million. Rapid7 also granted the initial purchasers of
the notes an option to purchase up to an additional $40.0 million
aggregate principal amount of notes. The sale of the notes is
expected to close on September 8, 2023, subject to customary
closing conditions.
The notes will be general unsecured obligations of Rapid7 and
will accrue interest payable semiannually in arrears on March 15
and September 15 of each year, beginning on March 15, 2024, at a
rate of 1.25% per year. The notes will mature on March 15, 2029,
unless earlier converted, redeemed or repurchased. The initial
conversion rate will be 15.4213 shares of Rapid7’s common stock per
$1,000 principal amount of notes (equivalent to an initial
conversion price of approximately $64.85 per share of Rapid7’s
common stock). The initial conversion price of the notes represents
a premium of approximately 32.50% over the last reported sale price
of Rapid7’s common stock on September 5, 2023. The notes will be
convertible into cash, shares of Rapid7’s common stock or a
combination of cash and shares of Rapid7’s common stock, at
Rapid7’s election.
Rapid7 may redeem for cash all or any portion of the notes
(subject to certain limitations), at its option on or after
September 21, 2026 and prior to the 21st scheduled trading day
immediately preceding the maturity date, if the last reported sale
price of Rapid7’s common stock has been at least 130% of the
conversion price then in effect for at least 20 trading days
(whether or not consecutive), including the trading day immediately
preceding the date on which Rapid7 provides notice of redemption,
during any 30 consecutive trading day period ending on, and
including, the trading day immediately preceding the date on which
Rapid7 provides notice of redemption, at a redemption price equal
to 100% of the principal amount of the notes to be redeemed, plus
accrued and unpaid interest to, but excluding, the redemption
date.
If Rapid7 undergoes a “fundamental change” (as defined in the
indenture governing the notes), subject to certain conditions and
exceptions, noteholders may require Rapid7 to repurchase for cash
all or any portion of their notes at a fundamental change
repurchase price equal to 100% of the principal amount of the notes
to be repurchased, plus accrued and unpaid interest to, but
excluding, the fundamental change repurchase date. In addition,
following certain corporate events that occur prior to the maturity
date or if Rapid7 delivers a notice of redemption, Rapid7 will, in
certain circumstances, increase the conversion rate for a
noteholder who elects to convert its notes in connection with such
a corporate event or convert its notes called (or deemed called)
for redemption in connection with such notice of redemption, as the
case may be.
Rapid7 estimates that the net proceeds from the offering will be
approximately $253.0 million (or approximately $292.0 million if
the initial purchasers exercise their option to purchase additional
notes in full), after deducting the initial purchasers’ discount
and estimated expenses payable by Rapid7. Rapid7 expects to use
approximately $201.5 million of the aggregate net proceeds from the
offering to repurchase $184.0 million aggregate principal amount of
its outstanding 2.25% Convertible Senior Notes due 2025 (the “2025
notes”), including accrued and unpaid interest on the 2025 notes,
in separate and privately negotiated transactions entered into
concurrently with the pricing of the offering. Rapid7 also expects
to use approximately $31.7 million of the net proceeds from the
offering to pay the cost of the capped call transactions described
below. If the option to purchase additional notes is exercised by
the initial purchasers in full, Rapid7 expects to use approximately
$4.9 million of the net proceeds from the sale of such additional
notes to enter into additional capped call transactions.
Rapid7 expects to use the remainder of the net proceeds for
general corporate purposes, which may include continued investment
in its sales and marketing efforts, product development, general
and administrative matters, and working capital. Rapid7 may also
use a portion of the proceeds from this offering for acquisitions
or strategic investments in complementary businesses or
technologies, although it does not currently have any plans for any
such acquisitions or investments.
In connection with any repurchase of the 2025 notes, Rapid7
expects that holders of the outstanding 2025 notes that have hedged
their equity price risk with respect to the 2025 notes (the “hedged
holders”) will, concurrently with the pricing of the notes, unwind
their hedge positions by buying Rapid7’s common stock and/or
entering into or unwinding various derivative transactions with
respect to Rapid7’s common stock. The amount of Rapid7’s common
stock to be purchased by the hedged holders may be substantial in
relation to the historic average daily trading volume of its common
stock. This activity by the hedged holders may have resulted in an
increase in the effective conversion price of the notes.
In connection with the pricing of the notes, Rapid7 entered into
capped call transactions with certain financial institutions (the
“option counterparties”). The capped call transactions will cover,
subject to customary adjustments, the number of shares of Rapid7’s
common stock that initially underlie the notes. The capped call
transactions are expected to offset the potential dilution to
Rapid7’s common stock as a result of any conversion of notes, with
such offset subject to a cap initially equal to $97.88 (which
represents a premium of 100% over the last reported sale price of
Rapid7’s common stock on September 5, 2023). If the initial
purchasers exercise their option to purchase additional notes,
Rapid7 expects to enter into additional capped call transactions
with the option counterparties.
In connection with establishing their initial hedges of the
capped call transactions, Rapid7 has been advised that the option
counterparties and/or their respective affiliates expect to enter
into various derivative transactions with respect to Rapid7’s
common stock concurrently with or shortly after the pricing of the
notes and/or purchase shares of Rapid7’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 Rapid7’s common stock or the notes at that time.
In addition, the option counterparties and/or their respective
affiliates may modify their hedge positions by entering into or
unwinding various derivatives with respect to Rapid7’s common stock
and/or purchasing or selling Rapid7’s common stock or other
securities of Rapid7 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 of the capped call
transactions, which are expected to occur during the 20 trading day
period beginning on the 21st 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 Rapid7’s common stock or the notes, which could
affect a noteholder’s ability to convert its notes and, to the
extent the activity occurs during any observation period related to
a conversion of notes, it could affect the amount and value of the
consideration that a noteholder will receive upon conversion of
such notes.
Neither the notes, nor any shares of Rapid7’s common stock
issuable upon conversion of the notes, have been registered under
the Securities Act or any state securities laws, and unless so
registered, may not be offered or sold in the United States absent
registration or an applicable exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act
and other applicable securities laws.
This press release is neither an offer to sell nor a
solicitation of an offer to buy any securities, nor shall it
constitute an offer, solicitation or sale of the securities in any
jurisdiction in which such offer, solicitation or sale would be
unlawful prior to the registration or qualification under the
securities laws of any such jurisdiction.
About Rapid7
Rapid7 (Nasdaq: RPD) is on a mission to create a safer digital
world by making cybersecurity simpler and more accessible. We
empower security professionals to manage a modern attack surface
through our best-in-class technology, leading-edge research, and
broad, strategic expertise. Rapid7’s comprehensive security
solutions help more than 11,000 global customers unite cloud risk
management and threat detection to reduce attack surfaces and
eliminate threats with speed and precision.
Forward-Looking Statements
This press release includes forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements include, but are not limited
to, the expected closing of the offering, the potential dilution to
Rapid7’s common stock and the anticipated use of net proceeds from
the offering. Our use of the words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “may,” “will” and similar
expressions are intended to identify forward-looking statements.
The events described in our forward-looking statements are subject
to a number of risks and uncertainties, assumptions and other
factors that could cause actual results and the timing of certain
events to differ materially from future results expressed or
implied by the forward-looking statements. Risks that could cause
or contribute to such differences include, but are not limited to,
growing macroeconomic uncertainty, unstable market and economic
conditions, fluctuations in our quarterly results, effectiveness of
our restructuring plan, failure to meet our publicly announced
guidance or other expectations about our business, our ability to
sustain our revenue growth rate, the ability of our products and
professional services to correctly detect vulnerabilities, renewal
of our customer's subscriptions, competition in the markets in
which we operate, market growth, our ability to innovate and manage
our growth, our sales cycles, our ability to integrate acquired
companies, and our ability to operate in compliance with applicable
laws as well as other risks and uncertainties that could affect our
business and results described in our filings with the Securities
and Exchange Commission (the “SEC”), including our most recent
Quarterly Report on Form 10-Q filed with the SEC on August 9, 2023,
particularly in the section entitled “Item 1.A Risk Factors,” and
in the subsequent reports that we file with the SEC. Moreover, we
operate in a very competitive and rapidly changing environment. New
risks emerge from time to time. It is not possible for our
management to predict all risks, nor can we assess the impact of
all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those expressed in any forward-looking statements
we may make. Except as required by law, we undertake no obligation
to update any forward-looking statements to reflect events or
circumstances after the date of such statements. You should,
therefore, not rely on these forward-looking statements as
representing our views as of any date subsequent to the date of
this press release.
Investor contact:
Elizabeth ChwalkDirector, Investor
Relationsinvestors@rapid7.com(617) 865-4277
Press contact:
Kelly CrummeyCorporate
Communicationspress@rapid7.com(617) 921-8089
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