Snowflake Inc. has announced its intention to offer $1.0 billion aggregate principal amount of its convertible senior notes due 2027 and $1.0 billion aggregate principal amount of its convertible senior notes due 2029 in a private placement. The company also plans to grant the initial purchasers of the notes options to purchase, within a 13-day period, up to an additional $150.0 million aggregate principal amount of the 2027 notes and up to an additional $150.0 million aggregate principal amount of the 2029 notes.
The notes will be general unsecured obligations of Snowflake and will accrue interest payable semiannually in arrears. The interest rate, initial conversion rate, and other terms of each series of notes will be determined at the time of pricing of the offering.
Snowflake expects to use the net proceeds from the offering for various purposes, including paying the cost of capped call transactions, repurchasing up to $575.0 million of shares of its common stock from purchasers of the notes in the offering in privately negotiated transactions, and for general corporate purposes, which may include other repurchases of its common stock from time to time under its existing or any future stock repurchase program, as well as acquisitions or strategic investments in complementary businesses or technologies.
In addition to the offering, Snowflake expects to enter into privately negotiated capped call transactions relating to each series of notes with one or more of the initial purchasers or affiliates thereof and/or other financial institutions. These capped call transactions are generally expected to reduce the potential dilution to Snowflake’s common stock upon any conversion of the relevant series of notes and/or offset any cash payments Snowflake is required to make in excess of the principal amount of converted notes of such series, subject to a cap.
Furthermore, Snowflake expects to use up to $575.0 million of the net proceeds from the offering to repurchase shares of its common stock from purchasers of the notes in privately negotiated transactions entered into concurrently with the pricing of the notes in the offering. The stock repurchases will be effected as part of Snowflake’s stock repurchase program authorized by its board of directors in February 2023 and increased and extended in August 2024.
The offering of the notes is not contingent upon the repurchase of shares of Snowflake’s common stock. The capped call transactions and the stock repurchases could impact the market price of Snowflake’s common stock and the trading price of the notes offered in the offering at that time.
It's important to note that the notes and any shares of Snowflake’s common stock issuable upon conversion of the notes have not been and will not be registered under the securities act or any state securities laws. The market has reacted to these announcements by moving the company's shares 1.3% to a price of $113.92. For more information, read the company's full 8-K submission here.
