- Snapchat parent company Snap Inc (NYSE: SNAP) announced it ended up raising more capital than planned
Snapchat parent company Snap Inc (NYSE: SNAP) announced earlier this week that it was proposing a private offering of convertible senior notes with a goal of raising $750 million to help ride through the economic crisis. And the company ended up raising more than expected.
Snap’s solid first-quarter earnings report likely helped drum up interest in the offering. As part of the earnings report, Snap revealed it saw gains in daily active users (DAUs) while people are spending more time online due to social distancing measures associated with the COVID-19 pandemic. The 11 million additional DAUs brought the total to a record 229 million.
Snap said that the offering was now upsized to $850 million — which indicates a jump in demand among institutional investors. Plus the investors also have options for purchasing up to another $150 million of the notes. This means that Snap could raise as much as $1 billion through the deal.
The bonds are going to mature on May 1, 2025 with an interest rate of 0.25%, according to Fool.com. And the initial conversion ratio will be 46.1233 Class A shares per note. This is around 35% more than the closing stock price on Thursday.
Snap will enter into capped call transactions in connection with the deal — which is a common strategy that companies issuing convertible notes use for mitigating potential dilutive effects if the notes are converted. These transactions will cost about $85 million, which will be coming from the net proceeds.
The extra capital will be adding to the $2.1 billion Snap has in cash and marketable securities as of the first quarter. Plus Snap also has $1.1 billion available through a revolver.
