8-KSecurities & ListingOther EventsExhibits & Filings

DIGITAL REALTY TRUST, INC. 8-K Report, Unregistered Securities Sale (Jul 11, 2014)

Filed July 11, 2014For Securities:DLRDLR-PJDLR-PKDLR-PL

Summary

Digital Realty Trust, Inc. (DLR) filed an 8-K on July 11, 2014, to report an unregistered sale of equity securities. Specifically, the company issued approximately 134,974 shares of its common stock to three "Davis Shareholders" in exchange for $5.24 million. This issuance effectively settled an inadvertent failure by these shareholders to exercise their right to exchange senior debentures for DLR common stock prior to their redemption. The transaction was structured as an exchange, placing the Davis Shareholders in the same financial position as if they had exercised their exchange rights initially. The shares were issued under an exemption from registration, relying on Section 4(2) of the Securities Act and Rule 506, indicating a private placement to sophisticated investors. DLR has agreed to register the resale of these shares, and has filed a prospectus supplement to facilitate this. For investors, this event signifies a resolution of a debenture exchange issue, resulting in a small issuance of new shares. The company has taken steps to allow for the eventual resale of these shares, which should be considered in any analysis of DLR's capital structure and share count.

Key Highlights

  • 1DLR issued 134,974 shares of common stock to three specific shareholders (Davis Real Estate Fund, Davis Real Estate Portfolio, and Shelby Cullom Davis Charitable Fund, Inc.).
  • 2The shares were issued in exchange for $5,236,377.83, representing the value of debentures that were inadvertently redeemed instead of being exchanged.
  • 3The transaction is treated as an exchange of 5.50% Exchangeable Senior Debentures due 2029 for DLR common stock for tax purposes.
  • 4The issuance of shares was conducted as a private placement, exempt from registration under Section 4(2) of the Securities Act and Rule 506.
  • 5DLR has agreed to register the resale of these issued shares by the Davis Shareholders.
  • 6A prospectus supplement was filed to register the resale of these shares.
  • 7DLR's operating partnership issued common units to the company in exchange for the shares, maintaining the capital structure alignment.

Frequently Asked Questions

DLR issued new shares to resolve a situation where certain shareholders inadvertently failed to exchange their senior debentures for DLR common stock before the debentures were redeemed. The share issuance effectively placed these shareholders in the same financial position as if they had completed the exchange.

No, the shares were not offered to the public. They were issued directly to specific shareholders (the Davis Shareholders) in a private placement transaction exempt from registration requirements under the Securities Act.

The shares were issued under restrictions. However, DLR has agreed to register the resale of these shares, and has filed a prospectus supplement to allow for their future sale in the market.

The issuance of approximately 134,974 shares represents a relatively small increase in DLR's outstanding common stock and involves a cash consideration of approximately $5.24 million. The primary impact is the settlement of a past obligation and the establishment of a path for future resale of these shares.