8-K: DoorDash Secures $2.5 Billion in Upsized 0% Convertible Senior Notes Offering to Boost Strategic Flexibility

• DoorDash, Inc. priced an offering of $2.5 billion aggregate principal amount of 0% convertible senior notes due 2030 in a private offering to qualified institutional buyers.
• The size of the offering was increased from the previously announced $2.0 billion, with an option for initial purchasers to buy an additional $250.0 million.
• The notes are senior, unsecured obligations, bear no regular interest, and will mature on May 15, 2030.
• The initial conversion price is approximately $291.97 per share, representing a 42.50% premium over DoorDash's Class A common stock closing price of $204.89 on May 27, 2025.
• DoorDash entered into convertible note hedge transactions to reduce potential dilution and warrant transactions with a strike price of $512.225 (a 150% premium).
• The estimated net proceeds of approximately $2,472 million will be used to fund the convertible note hedge transactions and for general corporate purposes, including potential acquisitions and share repurchases.

Score: 8

Explanation: The successful pricing of an upsized 0% convertible note offering with a significant conversion premium, coupled with hedging strategies to mitigate dilution, is a strong positive for DoorDash, providing substantial capital for strategic flexibility without immediate interest burden or significant equity dilution. This strengthens the company's financial position for future growth.

• Successful pricing of a significant $2.5 billion capital raise, which was upsized from $2.0 billion, indicating strong market demand and investor confidence.
• The notes bear 0% interest, minimizing ongoing interest expense for DoorDash and preserving cash flow.
• The initial conversion price of $291.97 per share represents a substantial 42.50% premium over the current stock price, significantly reducing immediate dilution risk for existing shareholders.
• Convertible note hedge transactions are in place to generally reduce potential dilution to Class A common stock upon any conversion of the notes and/or offset potential cash payments in excess of the principal amount.
• The capital raise enhances DoorDash's strategic flexibility, providing substantial funds for general corporate purposes, potential acquisitions, and potential share repurchases.
• The warrant transactions have a high strike price of $512.225, representing a 150% premium, further limiting dilution unless the stock price experiences significant appreciation.

• The warrant transactions could have a dilutive effect with respect to DoorDash's Class A common stock to the extent that the market price per share exceeds the strike price of the warrants, unless DoorDash elects to settle them in cash.
• Activities by option counterparties and/or their affiliates to hedge their positions (e.g., derivative transactions, stock purchases/sales) could increase or decrease the market price of DoorDash's Class A common stock or the notes, potentially causing volatility.

• Risks related to the offering of the notes, including the possibility that such transactions may not occur as anticipated.
• Risks associated with the intended use of proceeds from the offering.
• Risks related to the consummation of the convertible note hedge and warrant transactions.
• Potential market price fluctuations of DoorDash's Class A common stock or the notes due to hedging activities by option counterparties.
• Potential dilutive effect of warrant transactions if the market price of DoorDash's Class A common stock exceeds the strike price and DoorDash does not settle in cash.
• Other factors more fully described in DoorDash's Annual Report on Form 10-K for the year ended December 31, 2024, and Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2025.

DoorDash intends to use the net proceeds from the offering to fund the cost of entering into convertible note hedge transactions and for general corporate purposes, which may include potential acquisitions and potential repurchases of its outstanding Class A common stock. This strategic financing aims to enhance the company's financial flexibility and support future growth initiatives.

• "Opportunistic capital raise with proceeds used to enhance strategic flexibility."
• "A portion of the proceeds to be used to purchase a hedge overlay to offset any share dilution up to a 150% premium to the current stock price."

This capital raise by DoorDash, a prominent player in the local commerce and delivery platform industry, aligns with a broader trend among high-growth technology companies to leverage convertible debt. This financing method allows companies to raise significant capital at favorable terms (like 0% interest) while deferring or mitigating equity dilution, especially when stock valuations are strong. The use of sophisticated hedging strategies, such as convertible note hedges and warrants, is a common practice in the tech sector to manage the potential dilutive impact of such instruments, reflecting a mature approach to capital structure management in a competitive and capital-intensive industry.

• The 0% interest rate on the convertible notes is highly favorable, reflecting DoorDash's strong market position and creditworthiness, comparable to or better than similar offerings by other leading tech companies like Uber or Airbnb that have also utilized convertible debt for financing.
• The 42.50% conversion premium is robust, indicating strong investor confidence in DoorDash's future stock price appreciation, aligning with or exceeding premiums seen in recent convertible debt offerings by other high-growth tech firms such as Snowflake or Palantir.
• The implementation of convertible note hedge and warrant transactions is a standard and sophisticated practice for managing dilution in convertible debt offerings, widely adopted by companies like Tesla or Amazon in their past convertible debt issuances to protect existing shareholders from significant dilution.

• Shareholders: Potential for future dilution if notes convert and stock price exceeds warrant strike, but this is significantly mitigated by the convertible note hedge and the high conversion premium. Shareholders benefit from the company's enhanced strategic flexibility and potential share repurchases.
• Creditors: DoorDash is taking on $2.5 billion in senior, unsecured debt, which increases its leverage, but the 0% interest rate is highly favorable, reducing the immediate financial burden.
• Company (DoorDash): Gains significant capital for strategic initiatives, growth, and potential share repurchases without incurring immediate interest payments, strengthening its balance sheet and operational capacity.

• The sale of the notes to the initial purchasers is expected to settle on May 30, 2025, subject to customary closing conditions.
• The initial purchasers have an option to purchase up to an additional $250.0 million aggregate principal amount of notes for settlement within 13 days from the initial issue date.
• DoorDash intends to use the net proceeds for general corporate purposes, which may include potential acquisitions and potential repurchases of its outstanding Class A common stock.
• Option counterparties and/or their affiliates may modify or unwind their hedge positions, which could affect the market price of DoorDash's Class A common stock or the notes.

• 2013: DoorDash founding year.
• December 31, 2024: End of fiscal year for which DoorDash's Annual Report on Form 10-K was filed.
• March 31, 2025: End of quarterly period for which DoorDash's Quarterly Report on Form 10-Q was filed.
• May 15, 2030: Maturity date of the 0% convertible senior notes.
• May 20, 2028: Earliest date DoorDash may redeem the notes.
• May 27, 2025: Date of pricing announcement for the convertible senior notes offering and the last reported sale price of DoorDash's Class A common stock.
• May 28, 2025: Date the Form 8-K report was signed by Tony Xu.
• May 30, 2025: Expected settlement date for the sale of the notes to initial purchasers.
• November 15, 2029: Date from which the notes become convertible at any time at the election of holders until two trading days before maturity.