Aug 17, 2021
$575mm Convertible Notes Offering
Size: $575mm + 15% Shoe
Maturity: 5 Years
Structure: Provisionally Callable in 3 years with Make-Whole
Coupon: 0.25% (0.00% - 0.50% price talk)
Premium: 42.5% (42.5%-47.5% price talk)
Effective Premium: Up 100% with Capped Call
Financial Advisor: Matthews South
Bookrunners: GS, BofA, Citi
Use of Proceeds: Capped Call, GCP
Offering Type: 144A
Maturity: 5 Years
Structure: Provisionally Callable in 3 years with Make-Whole
Coupon: 0.25% (0.00% - 0.50% price talk)
Premium: 42.5% (42.5%-47.5% price talk)
Effective Premium: Up 100% with Capped Call
Financial Advisor: Matthews South
Bookrunners: GS, BofA, Citi
Use of Proceeds: Capped Call, GCP
Offering Type: 144A
$575mm Convertible
Pricing Judgements
- With the convertible market relatively slow after record-breaking supply in Q1/Q2, Matthews South assisted the company in selecting the appropriate launch strategy
- We advised the company on appropriate pricing range to balance the need to optimize terms while minimizing unnecessary execution risk
- Convertible priced at a 0.25% coupon and 42.5% conversion premium, in a market where investors have been clinging to the investor-friendly end of the marketing range
- Stock rallied throughout the day on the news of the transaction and closed down only 0.3% from previous close
Call Spread Bid
- We advised the company on documentation and suggested changes that would increase future flexibility of the company
- Matthews South ran a call spread auction across different strike prices to achieve an efficient pricing outcome for the company
- Upstart used a tax-integrated capped call to raise the effective conversion premium to up 100% (resulting in dilution protection up to 2x the stock price at issue) on top of a price that is up 900% since the IPO in Dec. 2020
- Upstart achieved an after-tax cost of capital of just ~1.7% for the combined financing
