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Shockwave Medical prices upsized private offering of $650M

Shockwave Medical (NASDAQ:SWAV) priced its offering of $650M aggregate principal amount of 1.00% convertible senior notes due 2028.

The aggregate principal amount of the offering was increased from the previously announced offering size of $500M.

Initial purchaser of the notes an option

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Comments (15)

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The convertible is the perfect was to get cheap funding for future M&A. If dilution occurs we will all be happy
Osmium Research profile picture
@MLen It really is a great financing.
The convertible notes can't even be cashed in until 2026 and the maximum payout is $444. This means that until 2026, there is no incentive to the convertible note owning institutions to push the price of the shares over $444 before 2026. For some, a double in 3 years is a great deal they'd take. For others, not so fast, not for a company growing this fast!
Steelhead15 profile picture
Bad timing on this placement.
Purewater profile picture
This just reiterates what the CEO said on the last call with how much opportunity they have to spend CapEx to expand facilities plus augmenting the int'l salesforce. They are now rocking a 50% ROIC so this will be money well spent.
wayne315315 profile picture
Actually, if you read through the press release on their website, the stock dilution won't happen unless the stock price surpass $440.70 per share. The company is planning to spend $83.5 million on capped call transactions (i.e. protective call spread) with the capped price of $440.70
The capped call transactions are expected generally to reduce the potential dilution to Shockwave Medical’s common stock upon conversion of the notes and/or offset any cash payments that Shockwave Medical could be required to make in excess of the principal amount of any converted notes, as the case may be, with such reduction and/or offset subject to a cap to be equal to a cap price of $444.70, which represents a premium of 100.0% over the closing price of Shockwave Medical’s common stock of $222.35 per share on the Nasdaq Global Select Market on August 10, 2023.
KevinDG profile picture
@wayne315315 Thank you Wayne. I saw that but honestly had trouble understanding the ultimate intention of that because of the legalese. That's great to know. It makes the deal that much more appealing.

What I also don't understand is why these companies don't concurrently put out some plain language PR statement explaining it. I'm sure the answer is: lawyers.
Steelhead15 profile picture
@KevinDG Well said.
Osmium Research profile picture
@KevinDG lawyers write these documents
Smart move. 1%. Great.
IMO the most important thing for SWAV in the coming years ist a fast international expansion to consolidate their dominant market position, with an own sales force, to prevent new upcoming competition. Thats costs money but makes additional revenue. They are on the right way!
SuperPac profile picture
Huge dilution built into this capital raise. Moreover the share price growth anticipated in the deal is small over the next 5 years. Agreed, you have to sweeten the deal in order to sell it but this is very sweet

$SWAV yesterday's close $222
SWAV conversion price expected after 5 years $289

The upside is that the money will be available to SWAV at 1% for 5 years while the rate environment stays elevated. The high rate environment is forcing companies to act more responsibly with capital, a discipline that was lost during ZIRP.
KevinDG profile picture
@SuperPac I wouldn't call it "huge." Feel free to double check my math. I'm coming up with at most 6.87%. Assuming the full $730.4M option is sold. At 3.4595 shares per $1,000, that equates to ~ 2,527,000 new shares. As of last week's earnings there were 36,750,397 shares outstanding.
Yes I'm a bull, but it seems like a fair deal all around. Rather than paying 7%/yr of interest, (which they'd most likely have to pay a higher rate in the current environment) they're going to pay 5% in aggregate interest on the bond (1%/yr) and the one-time 6.87% dilution. The bond holders do bear the risk that for whatever reason $289 may not come. The fact that the original offering was for $500M, but was basically upsized by 46% speaks to the confidence of the "smart money." As I see it their interests and mine are aligned. In fact I think I need to get my hands on some of those convertibles.
So now SWAV has about $1B in cash. They spoke a lot about how quickly they are outgrowing their production capacity. After Boston Scientific and now this, it's apparent they have no intention of selling themselves, and in fact look like they are gearing up for being acquirers.
SuperPac profile picture
Thanks for the feedback. Nearly 7% additional shares is not insignificant. Not gonna quibble over ''huge''. I have actually said that the deal is good for SWAV. I just feel that the deal is somewhat over-sweetened for the investors. Others may disagree with me. I like SWAV's business and its market positioning. But on events 5 years out, people will have different view-points especially when the rate environment is so full of uncertainties.
@KevinDG $650M is way more than needed to expand their manufacturing in Costa Rica and the US development center. As KevinDG says, it smells like an acquisition is in the cards.

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