PagerDuty, Inc. (NYSE: PD) (“PagerDuty”) today announced that it
intends to offer, subject to market conditions and other factors,
$350 million principal amount of Convertible Senior Notes due 2028
(the “notes”) in a private placement (the “offering”) to persons
reasonably believed to be qualified institutional buyers pursuant
to Rule 144A under the Securities Act of 1933, as amended (the
“Securities Act”). PagerDuty also intends to grant the initial
purchasers of the notes an option to purchase up to an additional
$52.5 million principal amount of notes.
The notes will be senior unsecured obligations of PagerDuty and
will accrue interest payable semiannually in arrears. Upon
conversion, PagerDuty will pay cash up to the aggregate principal
amount of the notes to be converted and pay or deliver, as the case
may be, cash, shares of PagerDuty’s common stock or a combination
of cash and shares of PagerDuty’s common stock, at PagerDuty’s
election, in respect of the remainder, if any, of PagerDuty’s
conversion obligation in excess of the aggregate principal amount
of the notes being converted. The interest rate, initial conversion
rate, repurchase or redemption rights and other terms of the notes
will be determined at the time of pricing of the offering.
PagerDuty expects to use a portion of the net proceeds from the
offering to pay the cost of the capped call transactions described
below. Additionally, PagerDuty expects to use a portion of the net
proceeds from the offering to repurchase for cash certain of its
1.25% Convertible Senior Notes due 2025 (the “2025 notes”) and
shares of PagerDuty’s common stock, each as described below.
PagerDuty intends to use the remainder of the net proceeds for
working capital or other general corporate purposes, which may
include potential acquisitions and strategic transactions. If the
initial purchasers exercise their option to purchase additional
notes, PagerDuty expects to use a portion of the net proceeds from
the sale of the additional notes to enter into additional capped
call transactions and the remainder of such net proceeds for
working capital or other general corporate purposes, which may
include potential acquisitions and strategic transactions. From
time to time, PagerDuty evaluates potential strategic transactions
and acquisitions of businesses, technologies or products.
In connection with the pricing of the notes, PagerDuty expects
to enter into privately negotiated capped call transactions (the
“capped call transactions”) with one or more of the initial
purchasers or their respective affiliates and/or other financial
institutions (the “option counterparties”). The capped call
transactions will cover, subject to customary adjustments, the
number of shares of PagerDuty’s common stock that will initially
underlie the notes. The capped call transactions are expected to
offset the potential dilution to PagerDuty’s common stock as a
result of any conversion of the notes, with such reduction subject
to a cap. If the initial purchasers exercise their option to
purchase additional notes, PagerDuty expects to enter into
additional capped call transactions with the option
counterparties.
In connection with establishing their initial hedges of the
capped call transactions, PagerDuty expects that the option
counterparties and/or their respective affiliates may enter into
various derivative transactions with respect to PagerDuty’s common
stock and/or purchase PagerDuty’s common stock in secondary market
transactions concurrently with or shortly after the pricing of the
notes, including with certain investors in the notes. This activity
could increase (or reduce the size of any decrease in) the market
price of PagerDuty’s common stock or the notes at that time.
In addition, PagerDuty expects that the option counterparties
and/or their respective affiliates may modify or unwind their hedge
positions by entering into or unwinding various derivative
transactions and/or purchasing or selling PagerDuty’s common stock
or other securities of PagerDuty 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 scheduled to occur during the
observation period relating to any conversion of the notes on or
after June 15, 2028 that is not in connection with a redemption, or
following PagerDuty’s election to terminate any portion of the
capped call transactions in connection with any repurchase,
redemption, exchange or early conversion of the notes). This
activity could also cause or avoid an increase or a decrease in the
market price of PagerDuty’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 its
notes.
PagerDuty expects to use a portion of the net proceeds from the
offering to repurchase for cash certain of its 2025 notes
concurrently with the pricing of the offering in privately
negotiated transactions effected through one of the initial
purchasers or one of its affiliates (each, a “note repurchase
transaction”). The terms of each note repurchase transaction will
depend on several factors. No assurance can be given as to how
much, if any, of these 2025 notes will be repurchased or the terms
on which they will be repurchased. The offering of the notes is not
contingent upon the repurchase of the 2025 notes.
In connection with any note repurchase transaction, PagerDuty
expects that holders of the 2025 notes who agree to have their 2025
notes repurchased and who have hedged their equity price risk with
respect to such notes (the “hedged holders”) will unwind all or
part of their hedge positions by buying PagerDuty’s common stock
and/or entering into or unwinding various derivative transactions
with respect to PagerDuty’s common stock. The amount of PagerDuty’s
common stock to be purchased by the hedged holders may be
substantial in relation to the historic average daily trading
volume of PagerDuty’s common stock. This activity by the hedged
holders could increase (or reduce the size of any decrease in) the
market price of PagerDuty’s common stock, including concurrently
with the pricing of the notes, resulting in a higher effective
conversion price of the notes. PagerDuty cannot predict the
magnitude of such market activity or the overall effect it will
have on the price of the notes offered hereby or its common stock.
In addition, in connection with any repurchases of the 2025 notes,
PagerDuty may elect to terminate portions of the capped call
transactions that it entered into in connection with the issuance
of the 2025 notes (the “existing capped call transactions”). In
connection with such terminations, the counterparties to the
existing capped call transactions may unwind various derivatives
and/or sell PagerDuty’s common stock or other securities of
PagerDuty in the secondary market following the pricing of the
notes, which could affect the market price of PagerDuty’s common
stock and the notes.
PagerDuty also expects to use up to $50.0 million of the net
proceeds from the offering to repurchase for cash shares of
PagerDuty’s common stock concurrently with the pricing of the
offering in privately negotiated transactions effected through one
of the initial purchasers or one of its affiliates. PagerDuty
expects to repurchase these shares from purchasers of notes in the
offering at a purchase price per share equal to the last reported
sale price per share of PagerDuty's common stock on the date of
pricing of the offering. These repurchases could increase (or
reduce the size of any decrease in) the market price of PagerDuty’s
common stock or the notes. In the case of repurchases effected
concurrently with the offering, this activity could affect the
market price of PagerDuty's common stock prior to, concurrently
with or shortly after the pricing of the notes, and could result in
a higher effective conversion price for the notes. PagerDuty cannot
predict the magnitude of such market activity or the overall effect
it will have on the price of the notes offered hereby or its common
stock.
Neither the notes, nor the shares of PagerDuty’s common stock
issuable upon conversion of the notes, if any, 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 or
to, or for the account or benefit of, U.S. persons, 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 any securities in any
state or jurisdiction in which such offer, solicitation or sale
would be unlawful prior to the registration or qualification under
the securities laws of any such state or jurisdiction.
About PagerDuty
PagerDuty, Inc. (NYSE:PD) is a global leader in digital
operations management. The PagerDuty Operations Cloud
revolutionizes how critical work gets done, and powers the agility
that drives digital transformation. Customers rely on the PagerDuty
Operations Cloud to compress costs, accelerate productivity, win
revenue, sustain seamless digital experiences, and earn customer
trust.
Forward-Looking Statements
This press release contains “forward-looking” statements, as
that term is defined under the federal securities laws, including
statements concerning the proposed terms of the notes and capped
call transactions, the completion, timing and size of the proposed
offering of the notes and capped call transactions, the anticipated
use of proceeds from the offering, and the timing or amount of any
repurchases of our 2025 notes or shares of our common stock, the
potential impact of the foregoing or related transactions on
dilution to holders of our common stock, the market price of our
common stock or the notes or the conversion price of the notes.
Forward-looking statements are subject to a number of risks and
uncertainties, many of which involve factors or circumstances that
are beyond our control. Our actual results could differ materially
from those stated or implied in forward-looking statements due to a
number of factors, including but not limited to whether we will
consummate the offering of notes on the expected terms or at all
and whether and on what terms we may consummate the note repurchase
transactions or repurchase shares of our common stock, each of
which could differ or change based upon market conditions or for
other reasons, and the other risks detailed in our Form 10-K filed
with the Securities and Exchange Commission (“SEC”) for the year
ended January 31, 2023, in our quarterly report on Form 10-Q for
the quarter ended July 31, 2023 and in other filings and reports
that we may file from time to time with the SEC. The
forward-looking statements included in this press release represent
our views as of the date of this press release. We anticipate that
subsequent events and developments will cause our views to change.
We undertake no intention or obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. These forward-looking statements should
not be relied upon as representing our views as of any date
subsequent to the date of this press release.
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version on businesswire.com: https://www.businesswire.com/news/home/20231009146000/en/
Investor Relations Contact:
Tony Righetti investor@pagerduty.com
SOURCE PagerDuty
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