Avalara announced that it intends to offer $850 million aggregate principal amount of its convertible senior notes due 2026 in a private organization to adequate institutional buyers in accordance with Rule 144A of the Securities Act of 1933. Additionally, Avalara intends to grant the initial purchasers of the Notes a 13-day option to purchase extra Notes in the aggregate principal amount of $127.5 million. Avalara anticipates using a portion of the Notes’ net proceeds to cover the costs of the capped call transactions described below.
Avalara intends to use the remaining net proceeds from the Notes for general corporate purposes. It may include financing acquisitions or investments in complementary businesses, technologies, services, products or other assets, as well as continuing investment in its product development, sales and marketing efforts, general and administrative operations, and working capital. The Notes will be Avalara’s senior unsecured obligations. They will be convertible at the holder’s option, subject to certain conditions and periods.
Interest will pay in arrears on a semi-annual basis. Avalara may elect to settle conversions of the Notes by paying or delivering cash, shares of common stock, shares of common stock, and a sequence of cash. Agreements between Avalara and the initial purchasers of the Notes will determine the conversion rate, interest rate, and other terms of the Notes. Avalara anticipates entering into privately negotiated capped call transactions with certain initial purchasers, their respective affiliates, and other financial institutions associated with the Notes’ pricing.
The capped call transactions will cover the initial number of shares of Avalara common stock underlying the Notes, subject to customary adjustments. The capped call transactions expect to offset any dilution to Avalara’s common stock that may result from any conversion of the Notes, subject to a cap. Avalara anticipates that if the initial purchasers exercise their option to purchase additional Notes, it will enter into increased capped call transactions with the Capped Call Counterparties.
Avalara anticipates that the Capped Call Counterparties or their affiliates will participate in various derivative transactions and purchase Avalara’s common stock shares concurrently with the Notes’ pricing. This activity may cause the market price of Avalara’s common stock or the Notes to rise at the time.
Avalara also expects the Capped Call Counterparties or their respective affiliates to modify their hedge positions by entering into or separating various derivative transactions concerning Avalara’s common stock and purchasing or selling Avalara’s common stock or other Avalara securities in secondary market transactions following the pricing of the Notes and before the maturity of the Notes. Additionally, on each exercise date for the capped call transactions, which are expected to occur during the 40 days beginning on the 41st scheduled trading day before the Notes’ maturity date or following any termination of any part of the capped call transactions in connection with the Notes’ redemption, repurchase, or early conversion. Additionally, this behaviour may result in or prevent an increase or drop in the market price of Avalara’s common stock or the Notes, affecting holders’ ability to convert the Notes. And, to the extent that the activity is related to a conversion of the Notes within any observation period, the number of shares, and the amount of the consideration received by holders of the Notes.
Additionally, suppose any such capped call transaction is not completed. In that case, regardless of whether this offering of the notes is completed, the Capped Call Counterparty may unwind its hedge positions in Avalara’s common stock. It could harm the value of Avalara’s common stock and, if the Notes have been issued, the value of the Notes.
This offering makes to qualified institutional buyers by Securities Act Rule 144A.
The Notes will be offered privately via a private offering memorandum. No Notes or shares of Avalara common stock issuable upon conversion have been or will be done under the Securities Act or any state securities laws. Unless registered, may not sell in the United States or to residents of the United States unless an exemption applies. Or in a transaction exempt from the Securities Act’s registration requirements. This news release is not an offer to sell or the solicitation of an offer to purchase any securities. Alternatively, it constitutes an offer, solicitation, or sale in any area where such an offer, solicitation, or sale is prohibited.
This press release involves “forward-looking” statements that are based on Avalara’s current knowledge and estimates, as well as assumptions about capital market conditions, business conditions, the economy, and other future conditions. All comments other than historical facts are considered forward-looking statements. It contains information about Avalara’s issuance of the Notes, the potential consequences of capped call transactions, and the anticipated use of the offering’s net proceeds. They can be identified by the use of forward-looking words such as “could,” “expect,” “intend,” “may,” or “suggested,” or by their negatives. Forward-looking statements contain known and unknown risks, uncertainties, and other facts that could cause actual results to differ substantially from those anticipated by Avalara.
These risks include but are not restricted to whether Avalara will complete the providing of the Notes and the capped call sales on the predicted terms. Avalara will be able to fulfill the conditions needed to close any sale of the Notes or the capped call transactions, and the truth is that Avalara’s management will have broad divisive power.
And other risks detailed in Avalara’s Securities and Exchange Commission (the “SEC”) filings and reports, including Avalara Annual Report on Form 10-K for the fiscal year ended December 31, 2020, that was filed with the SEC on February 25th, 2021. Furthermore, the forward-looking statements in this press release are based on assumptions that Avalara credits are flexible as of the date of this press announcement. Avalara disclaims any obligation to update these forward-looking statements due to new information, future events, changes in expectations, or otherwise unless required by law.