8-KMaterial AgreementsFinancial EventsSecurities & Listing+2

Salesforce, Inc. 8-K Report, Material Agreement (Jan 19, 2010)

Filed January 19, 2010For Securities:CRM

Summary

Salesforce.com, Inc. (CRM) filed this 8-K to announce the successful closing of its offering of $575 million in aggregate principal amount of 0.75% Convertible Senior Notes due 2015. The offering was upsized from an initial $500 million due to strong demand, with initial purchasers exercising their full over-allotment option. These notes were sold in a private placement to qualified institutional buyers, indicating significant investor interest in Salesforce's debt. The company also entered into related convertible note hedge and warrant transactions. The hedge transactions are designed to mitigate potential dilution from the conversion of the notes, while the warrants sold to the counterparties are potentially dilutive if the stock price rises significantly above the warrant strike price. These transactions demonstrate Salesforce's proactive approach to managing its capital structure and potential equity dilution.

Key Highlights

  • 1Closed offering of $575 million in 0.75% Convertible Senior Notes due 2015.
  • 2The offering was upsized from $500 million due to strong investor demand.
  • 3Notes were sold in a private placement to qualified institutional buyers (Rule 144A).
  • 4Entered into convertible note hedge transactions to mitigate potential dilution from note conversion.
  • 5Sold warrants to counterparties which could be dilutive if stock price increases significantly.
  • 6Notes carry a low coupon rate of 0.75% and mature in January 2015.
  • 7Conversion price is approximately $85.36 per share, with specific conversion triggers outlined.

Frequently Asked Questions

The primary purpose of this offering was to raise capital for Salesforce.com, Inc. The company has raised $575 million, which can be used for general corporate purposes, potentially including funding growth initiatives or other strategic investments.

Convertible notes can become dilutive to existing shareholders if the company's stock price rises above the conversion price and noteholders choose to convert their notes into shares. Salesforce has entered into convertible note hedge transactions to offset the potential dilution from the notes, but also sold warrants that could have a dilutive effect if the stock price appreciates significantly.

The notes bear a low interest rate of 0.75% and mature on January 15, 2015. They are convertible into Salesforce common stock at an initial conversion rate of 11.7147 shares per $1,000 principal amount, equating to an initial conversion price of approximately $85.36 per share. Conversion is subject to certain conditions, including stock price performance and specific corporate events.

The convertible senior notes are unsecured and unsubordinated obligations of Salesforce. They rank senior to any future subordinated debt but are effectively subordinated to any secured indebtedness and are structurally subordinated to the debt of Salesforce's subsidiaries.