Why is Affirm issuing these convertible notes?

Affirm expects to use the net proceeds, along with cash on hand, mainly to repurchase about $960 million of its 0% convertible notes due 2026 for $892.8 million. It is also using part of the financing for a concurrent $250 million share buyback.

What does the 42.5% conversion premium mean for shareholders?

The conversion price of about $101.02 is 42.5% above the $70.89 closing price on December 17, 2024. Noteholders would only benefit from conversion if the stock rises meaningfully above that level, which limits near-term dilution.

Could the transactions affect Affirm's stock price?

Yes. Affirm warns that repurchases of the 2026 notes, related hedging or derivative unwinds by holders, and the share repurchases could move the stock price, which could affect the notes' trading price and the initial conversion price if effected at pricing.

When can Affirm redeem the new notes?

Affirm cannot redeem the notes before December 20, 2027. After that date, it may redeem for cash only if the last reported sale price of its Class A common stock has been at least 130% of the conversion price for a specified period.

Will the new notes cause share dilution?

Affirm must pay cash up to the principal amount on conversion, so dilution would arise only from the amount by which conversion value exceeds principal, and only if the stock trades above the conversion price. Affirm may settle that excess in cash, shares, or both at its election.

AFRM 8-K SEC Disclosure

01—Abstract

Summary

Summary of the 8-K filed December 18, 2024. Cited figures are marked; the original filing is the authoritative source.

On December 17, 2024, Affirm Holdings (Nasdaq: AFRM) priced an upsized private offering of $800 million^a aggregate principal amount of 0.75% convertible senior notes due December 15, 2029, up from a previously announced $750 million.

The notes are senior, unsecured obligations, pay interest semiannually, and carry an initial conversion price of approximately $101.02^b per share, a 42.5% premium to the $70.89 closing price on December 17, 2024. Affirm cannot redeem the notes before December 20, 2027, and thereafter may redeem only if the stock trades at or above 130% of the conversion price for a specified period. Upon conversion, Affirm will settle principal in cash and may settle the excess in cash, shares, or a combination.

The initial purchasers also hold an option for up to an additional $120 million^c of notes within 13 days of issuance. Estimated net proceeds are about $785.2 million, or about $903.1 million if the option is exercised in full. The offering is expected to settle on December 20, 2024.

The company plans to use the proceeds, together with cash on hand, to repurchase about $960 million^d principal of its 0% convertible senior notes due 2026 for $892.8 million in cash, in privately negotiated transactions. Affirm also expects to repurchase 3,526,590 Class A shares for about $250.0 million, executed concurrently with the pricing at $70.89 per share.

The 2026 notes repurchases and related hedge unwinds could affect AFRM's stock price and the trading price of the new notes, and the company stated it has no authorized share repurchase program beyond these transactions. For investors, the deal refinances near-term zero-coupon debt into longer-dated, low-coupon debt, shifts some capital toward buybacks, and introduces potential dilution above the conversion price, partly offset by the cash-settled principal feature.

02—Key points

Key Highlights

Priced an upsized $800 million 0.75% convertible senior notes offering due 2029, increased from $750 million, with a 13-day option for up to $120 million more.
Initial conversion price of approximately $101.02 per share, a 42.5% premium to the December 17, 2024 closing price of $70.89.
Estimated net proceeds of about $785.2 million ($903.1 million with full option exercise), with settlement expected December 20, 2024.
Plans to repurchase about $960 million of 0% convertible notes due 2026 for $892.8 million in cash, refinancing near-term debt.
Concurrent repurchase of 3,526,590 Class A shares for approximately $250.0 million at $70.89 per share.
Call protection: no optional redemption before December 20, 2027, and thereafter only if the stock trades at least 130% of the conversion price.
Principal settled in cash upon conversion; excess conversion value may be settled in cash, shares, or a combination at Affirm's election.

03—Questions

Frequently Asked Questions

Why is Affirm issuing these convertible notes?
Affirm expects to use the net proceeds, along with cash on hand, mainly to repurchase about $960 million of its 0% convertible notes due 2026 for $892.8 million. It is also using part of the financing for a concurrent $250 million share buyback.
What does the 42.5% conversion premium mean for shareholders?
The conversion price of about $101.02 is 42.5% above the $70.89 closing price on December 17, 2024. Noteholders would only benefit from conversion if the stock rises meaningfully above that level, which limits near-term dilution.
Could the transactions affect Affirm's stock price?
Yes. Affirm warns that repurchases of the 2026 notes, related hedging or derivative unwinds by holders, and the share repurchases could move the stock price, which could affect the notes' trading price and the initial conversion price if effected at pricing.
When can Affirm redeem the new notes?
Affirm cannot redeem the notes before December 20, 2027. After that date, it may redeem for cash only if the last reported sale price of its Class A common stock has been at least 130% of the conversion price for a specified period.
Will the new notes cause share dilution?
Affirm must pay cash up to the principal amount on conversion, so dilution would arise only from the amount by which conversion value exceeds principal, and only if the stock trades above the conversion price. Affirm may settle that excess in cash, shares, or both at its election.

04—Continue

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