- The stock price of Tyler Technologies, Inc. (NYSE: TYL) is trading at over 13% pre-market. This is why it happened.
The stock price of Tyler Technologies, Inc. (NYSE: TYL) is trading at over 13% pre-market. Investors are responding to the company announcing the pricing of its offering of $525 million aggregate principal amount of 0.25% convertible senior notes due 2026 in a private offering to “qualified institutional buyers” pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). And Tyler will not issue any convertible senior notes due 2028. The issuance and sale of the Notes are scheduled for settling on March 9, 2021, subject to customary closing conditions. Tyler also granted the initial purchasers of the Notes a 13-day option to purchase up to an additional $75 million aggregate principal amount of Notes.
The Notes will be senior unsecured obligations of Tyler and will accrue interest at a rate of 0.25% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2021. And the Notes will mature on March 15, 2026, unless earlier repurchased, redeemed or converted. Before September 15, 2025, holders of the Notes will have the right to convert their Notes only upon the occurrence of certain events.
From and including September 15, 2025, holders of the Notes may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. And Tyler will settle conversions of the Notes either entirely in cash or in a combination of cash and shares of its common stock, at Tyler’s election.
But upon conversion of any Notes, the conversion value, which will be determined proportionately over a period of multiple trading days, will be paid in cash up to the principal amount of the Notes being converted. And the initial conversion rate of the Notes is 2.0266 shares of common stock per $1,000 principal amount of Notes (which represents an initial conversion price of approximately $493.44 per share of common stock). The initial conversion price represents a premium of approximately 30% over the last reported sale price of Tyler’s common stock on the New York Stock Exchange of $379.56 per share on March 4, 2021. The conversion rate and conversion price of the Notes will be subject to adjustment upon the occurrence of certain events.
The Notes will be redeemable (in whole or in part) for cash at Tyler’s option at any time, and from time to time, on or after March 15, 2024 and on or before the 30th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of Tyler’s common stock exceeds 130% of the conversion price for a specified period of time. And the redemption price will be equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. Holders of the Notes will have the right to require Tyler to repurchase their Notes upon the occurrence of a fundamental change (as defined in the indenture governing the Notes) at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.
Tyler estimates that the net proceeds from the offering will be approximately $516.6 million (or approximately $590.8 million if the initial purchasers fully exercise their option to purchase additional Notes), after deducting the initial purchasers’ discounts and commissions and estimated offering expenses. Tyler intends to use the net proceeds from the offering to fund a portion of the purchase price of its previously announced acquisition of NIC Inc. (the “NIC Acquisition”), to pay fees and expenses related to the NIC Acquisition, and, in the event that the NIC Acquisition does not close, for general corporate purposes (which may include future acquisitions).
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