01—Abstract
Summary
Summary of the 8-K filed February 28, 2024. Cited figures are marked; the original filing is the authoritative source.
On February 27, 2024, Super Micro Computer, Inc. completed the sale of $1.725 billiona in aggregate principal amount of 0.00% Convertible Senior Notes due 2029, including $225.0 million purchased through the initial purchasers' option, in a private placement under Rule 144A.
The Company received net proceeds of approximately $1.70 billionb, of which approximately $142.1 million was used to fund the Capped Call Transactions, with the remainder intended for general corporate purposes, including working capital for growth and business expansion. The notes are unsecured, do not bear regular interest, and are convertible into cash, common stock, or a combination at the Company's election, with an initial conversion price of approximately $1,341.38 per share. The notes carry holder conversion rights triggered by a share price exceeding 130% of the conversion price, trading-price conditions, certain corporate events, redemption calls, and conversion at any time from September 1, 2028 until the second scheduled trading day before maturity.
Holders may require repurchase at par upon a Fundamental Change, and the Company may redeem the notes on or after March 1, 2027 under the stated share price conditions. Events of default include cross-defaults on indebtedness of at least $50.0 millionc. The Company also entered into Capped Call Transactions with eight counterparties, with an initial cap price of $1,951.04 per share, representing a premium of approximately 100% above the $975.52 last reported sale price on February 22, 2024.
These transactions are intended to reduce potential dilution from conversions and/or offset cash payments above principal. Initially, a maximum of 1,768,125 common shares may be issued upon conversion, based on an initial maximum conversion rate of 1.0250 shares per $1,000d principal amount, subject to anti-dilution adjustments.
02—Key points
Key Highlights
- Completed sale of $1.725 billion of 0.00% Convertible Senior Notes due 2029, including $225.0 million from the initial purchasers' option, on February 27, 2024
- Net proceeds of approximately $1.70 billion, with approximately $142.1 million used to fund the Capped Call Transactions
- Initial conversion price of approximately $1,341.38 per share (conversion rate of 0.7455 shares per $1,000 principal)
- Capped Call Transactions with eight counterparties carry an initial cap price of $1,951.04 per share, a premium of approximately 100% over the $975.52 reference price on February 22, 2024
- Notes are general unsecured obligations, structurally subordinated to all liabilities of subsidiaries, with no regular interest and no principal accretion
- Company may redeem notes on or after March 1, 2027 if the share price exceeds 130% of the conversion price, subject to conditions
- Holders may require repurchase at principal amount upon a Fundamental Change; cross-default triggers at $50.0 million of indebtedness
03—Questions
Frequently Asked Questions
How much capital did Super Micro Computer raise from the convertible notes offering?
The Company sold $1.725 billion in aggregate principal amount of 0.00% Convertible Senior Notes due 2029, including $225.0 million purchased through the initial purchasers' option. It received net proceeds of approximately $1.70 billion.
Will the notes dilute existing shareholders?
The notes may be settled in cash, common stock, or a combination at the Company's election. The Capped Call Transactions are expected generally to reduce potential dilution upon conversion and/or offset cash payments above principal, subject to a cap. Initially, a maximum of 1,768,125 shares may be issued upon conversion.
What is the use of proceeds?
Approximately $142.1 million of the net proceeds funded the Capped Call Transactions. The Company intends to use the remainder for general corporate purposes, including working capital for growth and business expansion.
When can holders convert the notes?
Holders may convert during any calendar quarter after the quarter ending June 30, 2024 if the share price exceeds 130% of the conversion price for at least 20 of 30 consecutive trading days, under trading-price conditions, upon certain corporate events, if the Company calls notes for redemption, and at any time from September 1, 2028 until the second scheduled trading day before maturity.
Can the Company redeem the notes early?
Yes. On or after March 1, 2027 and before the 20th scheduled trading day before maturity, the Company may redeem the notes in whole or in part if the share price exceeds 130% of the conversion price on at least 20 of 30 consecutive trading days and on the trading day before the redemption notice. Partial redemption requires at least $100.0 million of notes to remain outstanding.
04—Continue