01—Abstract
Summary
Summary of the 8-K filed July 3, 2025. Cited figures are marked; the original filing is the authoritative source.
On July 3, 2025, Zscaler, Inc. issued $1.725 billiona aggregate principal amount of 0.00% Convertible Senior Notes due July 15, 2028 under an Indenture with U.S. Bank Trust Company, National Association, as trustee.
The offering was sold to qualified institutional buyers under Rule 144A and included the initial purchasers' exercised option for an additional $225.0 millionb of notes. The Notes carry no regular interest, do not accrete, and are senior unsecured obligations. Zscaler may not redeem them before maturity, and holders have a put right at 100% of principal plus accrued special interest upon a fundamental change.
The initial conversion rate is 2.2752 shares of common stock per $1,000c principal amount, equivalent to an initial conversion price of approximately $439.52 per share. Zscaler may settle conversions in cash, shares, or a combination, at its election. Holders may convert before April 15, 2028 only under specified circumstances, including stock price conditions tied to 130% of the conversion price and trading price conditions, and may convert freely from April 15, 2028 until the second scheduled trading day before maturity.
Zscaler estimates net proceeds of approximately $1.70 billiond and used about $197.0 million to pay for capped call transactions, which cover the shares underlying the Notes and carry a cap price of $784.85 per share. The remaining proceeds are intended for general corporate purposes, including working capital, capital expenditures, and potential acquisitions and strategic transactions.
02—Key points
Key Highlights
- Issued $1.725 billion of 0.00% Convertible Senior Notes due July 15, 2028, including the full $225.0 million over-allotment option exercised July 1, 2025
- Initial conversion price of approximately $439.52 per share (2.2752 shares per $1,000 principal); Zscaler may settle in cash, shares, or both
- Notes cannot be redeemed by Zscaler before maturity and carry no sinking fund; holders may require repurchase at 100% of principal plus accrued special interest upon a fundamental change
- Estimated net proceeds of approximately $1.70 billion; about $197.0 million used to fund capped call transactions
- Capped calls cover the initial underlying shares, with a cap price of $784.85 per share, representing a 150% premium over the June 30, 2025 closing price
- Notes are senior unsecured obligations, effectively junior to secured debt and structurally junior to all liabilities of subsidiaries
- Events of default include cross-acceleration on indebtedness exceeding $175.0 million, with a 25% holder threshold for acceleration
03—Questions
Frequently Asked Questions
What is the cost of the convertible notes to Zscaler?
The Notes bear no regular interest and their principal does not accrete. Special interest may be payable only if Zscaler fails to meet certain reporting obligations under the Indenture.
When can holders convert their Notes?
Before the close of business on the business day preceding April 15, 2028, holders may convert only under specified circumstances, such as when the stock price meets a threshold of 130% of the conversion price for 20 of 30 trading days in a fiscal quarter, when the trading price of the Notes falls below 98% of the implied value, or upon specified corporate events. From April 15, 2028 until the second scheduled trading day before maturity, holders may convert at any time.
How does the capped call transaction affect dilution?
The capped call transactions are separate from the Notes and are expected to reduce potential dilution from conversions and/or offset cash payments in excess of converted principal, subject to a cap. The cap price is initially $784.85 per share.
How will the proceeds be used?
Zscaler used approximately $197.0 million to pay for the capped call transactions and intends to use the remainder for general corporate purposes, which may include working capital, capital expenditures, and potential acquisitions and strategic transactions.
Can Zscaler redeem the Notes early?
No. Zscaler may not redeem the Notes before the July 15, 2028 maturity date, and no sinking fund is provided. Holders do have a repurchase right upon a fundamental change.
04—Continue