AKAM
Akamai Technologies INC
NASDAQ
8-K: Akamai Announces $1.5 Billion Upsized Offering of Convertible Senior Notes Due 2033
Sentiment:
8-K Filing
15 May 2025 7:49 AM
Akamai Technologies has priced a private offering of $1.5 billion in convertible senior notes due 2033, with an option for initial purchasers to buy an additional $225 million.
Capital raise
Akamai is issuing $1.5 billion in convertible senior notes due 2033 in a private offering.
Initial purchasers have an option to purchase an additional $225 million in notes.
The company intends to use the net proceeds for debt repayment, share repurchases, and convertible note hedge transactions.
Summary
- Akamai Technologies announced the pricing of a private offering of $1.5 billion in convertible senior notes due 2033.
- The offering was upsized from a previously announced $1.35 billion.
- Initial purchasers have an option to purchase an additional $225 million in notes.
- The notes will mature on May 15, 2033, and bear interest at 0.25% per year, payable semiannually.
- The initial conversion price is approximately $93.01 per share, a 20% premium over the May 14, 2025 closing price of $77.51.
- Akamai estimates net proceeds of $1,479.1 million, or $1,701.3 million if the option is fully exercised.
- The company intends to use the proceeds to repay $250 million in revolving credit facility borrowings and a portion of its $1.15 billion convertible notes due 2027.
- Akamai will also use $239.1 million for convertible note hedge transactions and approximately $300 million to repurchase shares.
- Holders can require Akamai to repurchase the notes on May 15, 2031, if Akamai's stock price is below the conversion price.
- Akamai entered into convertible note hedge and warrant transactions to reduce potential dilution upon conversion.
Sentiment
Score: 7
Explanation: The announcement is generally positive, indicating a successful capital raise and strategic use of proceeds. However, potential dilution and market risks associated with the convertible notes temper the overall sentiment.
Positives
- The upsized offering suggests strong investor demand for Akamai's notes.
- The convertible note hedge transactions are expected to reduce potential dilution upon conversion of the notes.
- The share repurchase program could provide support for Akamai's stock price.
- Repaying debt under the revolving credit facility and addressing the 2027 notes improves Akamai's financial flexibility.
Negatives
- The convertible note hedge and warrant transactions could have a dilutive effect on Akamai's common stock if the market price exceeds the warrant strike price.
- The company will incur expenses related to the offering, including discounts for initial purchasers and offering expenses.
- The notes are senior unsecured obligations, meaning they are not backed by specific assets and carry more risk than secured debt.
Risks
- The completion of the notes offering is subject to customary closing conditions and may not occur on the anticipated terms or at all.
- General economic, industry, market, or political conditions could impact Akamai's ability to utilize the proceeds as planned.
- The convertible note hedge and warrant transactions involve counterparties, and there is a risk that these transactions may not perform as expected.
- The market price of Akamai's common stock could be affected by the hedging activities of the option counterparties.
Future Outlook
Akamai anticipates completing the offering of the notes and using the proceeds as described, but there is no assurance that the offering will be completed on the anticipated terms or at all. The company may update forward-looking statements in the future but disclaims any obligation to do so.
Industry Context
In the cybersecurity and cloud computing industry, raising capital through convertible notes is a common strategy for companies like Akamai to fund growth initiatives, manage debt, and optimize their capital structure. This offering allows Akamai to access capital at a relatively low interest rate while providing investors with the potential for equity upside.
Comparison to Industry Standards
- Other tech companies, such as Cloudflare and Fastly, have also utilized convertible notes to raise capital.
- The 0.25% interest rate on Akamai's notes is relatively low, reflecting the company's strong credit profile.
- The conversion premium of 20% is within the typical range for convertible note offerings in the tech sector.
- Akamai's plan to use proceeds for debt repayment and share repurchases is a common strategy among mature tech companies.
Stakeholder Impact
- Shareholders may experience dilution if the notes are converted and the market price of Akamai's common stock exceeds the warrant strike price.
- Employees may benefit from the company's improved financial flexibility and strategic investments.
- Customers may see enhanced services and innovation as a result of Akamai's capital investments.
- Creditors may benefit from the repayment of debt and improved financial stability of Akamai.
Next Steps
- The sale of the notes is expected to close on May 19, 2025, subject to customary closing conditions.
- Akamai will execute its plan to use the net proceeds, including debt repayment, share repurchases, and convertible note hedge transactions.
- The Option Counterparties will likely engage in hedging activities related to the convertible note hedge and warrant transactions.
Key Dates
- May 14, 2025: Date of press release and pricing of the convertible senior notes; Akamai's common stock closing price was $77.51.
- May 15, 2025: Date of the 8-K filing.
- May 19, 2025: Expected closing date of the sale of the notes, subject to customary closing conditions.
- November 15, 2025: First semiannual interest payment date on the notes.
- September 1, 2027: Maturity date of Akamai's 0.375% Convertible Senior Notes due 2027.
- May 15, 2031: Optional repurchase date for the notes.
- January 15, 2033: Date before which the notes are convertible only under certain circumstances.
- May 15, 2033: Maturity date of the convertible senior notes.
Keywords
Convertible Notes, Akamai, Debt Offering, Senior Notes, Financing, Share Repurchase, Convertible Note Hedge, Warrant Transactions
AKAM
Akamai Technologies INC
NASDAQ
Sector: TBD
Filings with Classifications
Capital raise
15 May 2025 7:49 AM
8-K Filing
- Akamai is issuing $1.5 billion in convertible senior notes due 2033 in a private offering.
- Initial purchasers have an option to purchase an additional $225 million in notes.
- The company intends to use the net proceeds for debt repayment, share repurchases, and convertible note hedge transactions.
Capital raise
13 May 2025 4:56 PM
8-K Filing
- Akamai is offering $1.35 billion of Convertible Senior Notes due 2033 in a private offering.
- The initial purchasers have an option to purchase an additional $202.5 million in notes.
- Akamai intends to use the net proceeds to repay debt and repurchase shares.
Worse than expected
9 May 2025 4:08 PM
Quarterly Report
- Net income and diluted earnings per share decreased compared to the same period last year, indicating a decline in profitability.
- Delivery solutions revenue decreased due to pricing pressure and customer optimization, impacting overall revenue growth.
Better than expected
1 April 2025 4:17 PM
Proxy Statement
- Security revenue exceeded $2 billion, growing 16% year-over-year and representing the majority of Akamai's annual revenue.
- Cloud computing revenue reached over $630 million, a 25% increase year-over-year.
- Operating cash flow climbed to $1.52 billion, or 38% of revenue.
Better than expected
27 February 2025 4:31 PM
Current Report
- The CEO's purchase of $3 million in company stock signals confidence in the company's future, which is a better than expected sign.
Worse than expected
24 February 2025 5:10 PM
Annual Results
- Revenue from delivery solutions decreased due to customer optimization and pricing pressure.
- A large social media customer reduced traffic on Akamai's network, negatively impacting revenue.
Worse than expected
8 November 2024 4:33 PM
Quarterly Report
- The company's net income decreased significantly compared to the same period last year.
- The company incurred a substantial restructuring charge impacting profitability.
- Delivery solutions revenue declined, indicating challenges in this segment.
Worse than expected
7 November 2024 4:04 PM
Quarterly Report
- GAAP income from operations decreased by 60% due to a restructuring charge.
- GAAP net income decreased by 64% year-over-year.
- Non-GAAP net income decreased by 3% year-over-year.
Worse than expected
8 August 2024 4:51 PM
Quarterly Report
- The company's delivery revenue declined by 13.2%, indicating a worse than expected performance in that segment.
- The acquisition of Noname Security is expected to be dilutive to earnings per share through 2024, which is worse than expected.
Better than expected
9 May 2024 4:46 PM
Quarterly Report
- The company's net income and earnings per share significantly increased compared to the same quarter last year, indicating better than expected profitability.
Better than expected
9 May 2024 4:25 PM
Quarterly Report
- The company's GAAP net income per diluted share increased by 79% year-over-year, which is significantly better than expected.
- The combined growth of security and compute revenue at 22% year-over-year exceeded expectations.
- The authorization of a new $2.0 billion share repurchase program is a positive surprise for investors.
Better than expected
28 March 2024 4:02 PM
Proxy Statement
- Akamai's total revenue, security revenue, and compute revenue all showed significant year-over-year growth, indicating better-than-expected performance in key areas.
- Akamai's share price increase of 40% in 2023 outperformed the S&P 500 (up 24%).
Worse than expected
28 February 2024 4:21 PM
Annual Results
- The company's delivery revenue declined by 7.6% due to pricing pressures and moderated traffic growth, indicating worse than expected results in this segment.
Better than expected
13 February 2024 4:04 PM
Quarterly Report
- The company's Q4 and full-year results exceeded expectations, particularly in security and compute revenue growth and profitability metrics.
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