Summary
Equinix, Inc. (EQIX) filed an 8-K on November 25, 2014, detailing the completion of a previously announced special distribution. The company issued approximately 1.48 million shares of common stock and paid out $83.3 million in cash, totaling $416.0 million or $7.57 per share. This distribution is intended to fully distribute Equinix's accumulated earnings and profits prior to 2015, a critical step for its planned conversion to a Real Estate Investment Trust (REIT) on January 1, 2015. The filing also notes an adjustment to the conversion rate of its 4.75% Convertible Subordinated Notes due 2016, impacting the number of shares issuable upon conversion and lowering the effective conversion price.
Key Highlights
- 1Equinix completed a special distribution of $416.0 million ($7.57 per share) consisting of cash and common stock.
- 2The special distribution is designed to fully distribute pre-2015 accumulated earnings and profits in preparation for a REIT conversion.
- 3Equinix plans to convert to a REIT effective January 1, 2015.
- 4The conversion rate of the 4.75% Convertible Subordinated Notes due 2016 has been adjusted due to the special distribution.
- 5The conversion price for the 2016 Convertible Notes has decreased from approximately $84.32 to $81.48 per share.
- 6The company acknowledges significant complexities and uncertainties surrounding the REIT conversion, including obtaining an IRS private letter ruling and ensuring ongoing REIT qualification.
- 7The REIT structure may limit Equinix's ability to make certain investments, particularly in taxable REIT subsidiaries or non-qualifying assets.
Frequently Asked Questions
The special distribution was made to distribute fully Equinix's accumulated earnings and profits as of December 31, 2014. This is a crucial requirement for the company's planned conversion to a Real Estate Investment Trust (REIT) on January 1, 2015.
The special distribution triggered an adjustment to the conversion rate of Equinix's 4.75% Convertible Subordinated Notes due June 15, 2016. This resulted in an increase in the number of shares issuable per $1,000 principal amount and a decrease in the effective conversion price per share.
The company highlighted several risks, including the uncertainty of obtaining a favorable private letter ruling from the IRS, the need for board approval and completion of other conversion actions, and the complexities of complying with ongoing REIT qualification rules. Furthermore, REIT regulations may limit the company's ability to invest in certain non-qualifying assets or expand non-real estate activities.
Equinix stated its intention to convert to a REIT as of January 1, 2015. However, the filing also notes that success is not assured and depends on various factors, including receiving necessary IRS approvals and completing internal reorganizations.