8-KMaterial AgreementsFinancial EventsSecurities & Listing+2

DEXCOM INC 8-K Report, Material Agreement (May 5, 2023)

Filed May 5, 2023For Securities:DXCM

Summary

DEXCOM INC (DXCM) filed an 8-K on May 5, 2023, detailing the completion of a $1.25 billion offering of 0.375% Convertible Senior Notes due 2028. The offering, which included the full exercise of an option to purchase additional notes, was conducted as a private placement under Section 4(a)(2) and Rule 144A, targeting qualified institutional buyers. The net proceeds, estimated at approximately $1,230.6 million after expenses and a $101.3 million allocation for capped call transactions, will be used for capital expenditures, working capital, and general corporate purposes. A significant portion of the proceeds, approximately $188.7 million, was also used to repurchase shares of the Company's common stock. The convertible notes mature on May 15, 2028, with an interest rate of 0.375% payable semi-annually. The notes are unsecured and unsubordinated obligations of DexCom. The company has the option to redeem the notes under specific conditions after May 20, 2026. The notes are convertible into cash, shares of common stock, or a combination thereof, at an initial conversion rate of 6.1571 shares per $1,000 principal amount, implying an initial conversion price of approximately $162.41 per share. Conversion is subject to certain conditions, including stock price performance thresholds and specific corporate events. To mitigate potential dilution from the conversion of these notes, DexCom entered into capped call transactions, which are expected to reduce dilution and/or offset cash payments, subject to a cap price of approximately $212.62.

Key Highlights

  • 1DexCom completed a $1.25 billion offering of 0.375% Convertible Senior Notes due 2028.
  • 2Net proceeds from the offering are approximately $1,230.6 million.
  • 3Approximately $188.7 million of proceeds were used to repurchase company stock.
  • 4The notes bear a low interest rate of 0.375% and mature on May 15, 2028.
  • 5The initial conversion price is approximately $162.41 per share, with an initial conversion rate of 6.1571 shares per $1,000 principal.
  • 6Capped call transactions were entered into to mitigate potential dilution from note conversions.
  • 7The capped call transactions have a cap price of approximately $212.62 per share.

Frequently Asked Questions

DexCom issued $1.25 billion in aggregate principal amount of 0.375% Convertible Senior Notes due 2028. The notes are unsecured and unsubordinated obligations of the company. They mature on May 15, 2028, and bear interest at a rate of 0.375% per year, payable semi-annually. The company may redeem the notes under specific conditions after May 20, 2026. The notes are convertible into cash, shares of common stock, or a combination thereof, at the company's election, at an initial conversion rate of 6.1571 shares per $1,000 principal amount, translating to an initial conversion price of approximately $162.41 per share.

The net proceeds from the offering are estimated to be approximately $1,230.6 million. Of this amount, approximately $101.3 million was used for capped call transactions. Additionally, approximately $188.7 million was used to repurchase shares of DexCom's common stock. The remaining proceeds are intended for capital expenditures, working capital, and general corporate purposes.

The capped call transactions are derivative agreements entered into with financial institutions to reduce potential dilution to DexCom's common stock upon conversion of the notes. They are designed to offset any potential increase in the number of shares issued or the cash paid by the company above a certain threshold. The cap price for these transactions is approximately $212.62 per share, representing an 80% premium over the stock price at the time of pricing.

Holders can convert their notes prior to maturity under several conditions. These include: if the stock price is at least 130% of the conversion price for a specified period in a quarter; if the trading price of the notes falls below 98% of the product of the stock price and conversion rate for five consecutive trading days; if the company calls the notes for redemption; or upon the occurrence of specified corporate events. Conversion can result in receiving cash, shares, or a combination thereof.