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 to purchase, within a 13-day period from, and including, the date on which the notes are first issued, up to an additional $100M aggregate principal amount of notes.
The sale of the notes is expected to close on August 15, 2023.
Net proceeds from the offering will be ~$632.9M (or ~$730.4M if the initial purchaser exercises its option to purchase additional notes in full), after deducting the initial purchaser’s discount and estimated offering expenses payable by Shockwave Medical.
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Comments (15)
@MLen It really is a great financing.
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.
@SuperPac@KevinDG
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
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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.
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shockwavemedical.com/...
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 $222.35 per share on the Nasdaq Global Select Market on August 10, 2023.
"""
shockwavemedical.com/...
@wayne315315 Thank you Wayne. I saw that but honestly had trouble understanding the ultimate intention of that because of the legalese. That's great to know. It makes the deal that much more appealing.What I also don't understand is why these companies don't concurrently put out some plain language PR statement explaining it. I'm sure the answer is: lawyers.
@KevinDG lawyers write these documents
Huge dilution built into this capital raise. Moreover the share price growth anticipated in the deal is small over the next 5 years. Agreed, you have to sweeten the deal in order to sell it but this is very sweet$SWAV yesterday's close $222
SWAV conversion price expected after 5 years $289The 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.
SWAV conversion price expected after 5 years $289The 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.
@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.
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.
@KevinDG
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.
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.