SAN FRANCISCO - SoFi Technologies, Inc. (NASDAQ: NASDAQ:SOFI), a digital financial services company, announced today its plans to offer $750 million in convertible senior notes due in 2029 to qualified institutional buyers. The offering, which is subject to market conditions and other factors, also includes an option for initial purchasers to acquire an additional $112.5 million in notes within 13 days from the issue date.
The notes, set to mature on March 15, 2029, will be unsecured and unsubordinated, with interest payable semi-annually. Noteholders will have the ability to convert their notes into cash, shares of SoFi's common stock, or a combination thereof under certain conditions. SoFi reserves the right to redeem the notes wholly or partially after March 15, 2027, and before the 30th scheduled trading day before maturity, provided specific price and liquidity conditions are met.
SoFi intends to allocate a portion of the net proceeds to finance capped call transactions, which aim to minimize potential dilution from the conversion of the notes or to offset cash payments required upon conversion. The remainder of the proceeds will be used to redeem SoFi's 12.5% Series 1 Preferred Stock, pay related fees, and for general corporate purposes, which may include repaying higher-cost debt.
In conjunction with the note offering's pricing, SoFi plans to enter into capped call transactions with some initial purchasers or their affiliates and other financial institutions. These transactions will generally reduce potential stock dilution upon conversion of the notes or offset potential cash payments SoFi may have to make, subject to a cap.
SoFi has been informed that the option counterparties or their affiliates may engage in various derivative transactions with SoFi's common stock and/or purchase SoFi's common stock around the pricing of the notes, which could affect the stock's market price or the notes.
Prior to this offering, SoFi negotiated exchanges with some holders of its 0% Convertible Senior Notes due 2026, exchanging $600 million in principal amount of these notes for approximately 61.7 million shares of SoFi common stock. The final number of shares will be based on SoFi's common stock's daily volume-weighted average price over a specific period. Following this offering, SoFi may conduct additional exchanges or repurchase its 2026 notes.
This news article is based on a press release statement from SoFi Technologies, Inc.
InvestingPro Insights
As SoFi Technologies, Inc. (NASDAQ: SOFI) ventures into the convertible senior notes market, investors are closely monitoring the company's financial health and stock performance. Here are some insights from InvestingPro that could be particularly relevant in the context of SoFi's recent announcement.
InvestingPro Data shows SoFi's market capitalization stands at $8.38 billion, reflecting the company's size and market value. Despite a challenging market environment, SoFi has demonstrated significant revenue growth, with a 36.11% increase over the last twelve months as of Q4 2023. This growth is a testament to the company's ability to expand its revenue streams in a competitive digital financial landscape. Moreover, SoFi's gross profit margin remains robust at 81.62%, highlighting the company's strong profitability potential from its core operations.
On the flip side, the company's P/E Ratio (Adjusted) for the same period is -79.44, which indicates that investors are currently paying a high price for non-existent earnings, reflecting the market's expectations for future profitability. This ties into two InvestingPro Tips that investors should consider: SoFi is expected to become profitable this year, suggesting a potential turnaround in its financial performance. However, the company has been quickly burning through cash, which is a critical factor for investors to watch, especially as the company takes on additional debt through the convertible note offering.
Investors interested in a deeper dive into SoFi's financials and future outlook can find additional InvestingPro Tips by visiting https://www.investing.com/pro/SOFI. For instance, there are insights on the company's stock price volatility, which has been quite high. This could have implications for both the convertible note offering and the potential for stock dilution or cash payments upon conversion. Additionally, with a strong return over the last month, SoFi's stock has shown resilience, which may be an encouraging sign for investors considering the company's convertible notes.
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