Tandem Diabetes Care Inc reported late Monday that it will offer $200 million in convertible senior notes maturing in 2032 in a private placement to qualified institutional buyers, and its shares fell about 5% in after-hours trading following the disclosure.
The company said it also will grant initial purchasers an option to acquire up to an additional $30 million principal amount of notes within 13 days of issuance. The notes are described as unsecured obligations of Tandem and will accrue interest that is payable on a semiannual basis.
Under the terms disclosed by the company, upon conversion Tandem will either pay cash, deliver shares of its common stock, or use a combination of both methods at its election. Tandem indicated it expects to use the net proceeds to pay for capped call transactions and for general corporate purposes, which the company specified may include acquisitions or strategic investments in complementary businesses or technologies, as well as working capital, operating expenses and capital expenditures.
In connection with the pricing of the notes, Tandem plans to enter into privately negotiated capped call transactions with the initial purchasers or their affiliates and with other financial institutions. The company said these capped call transactions are intended to offset potential dilution to its common stock that could result if the notes are converted, although the offset will be subject to a cap.
Tandem also disclosed that option counterparties or their affiliates may purchase shares of its common stock concurrently with, or shortly after, the pricing of the notes. The company noted this activity could have an impact on the market price of its stock.
Finally, Tandem cautioned that the notes and any shares issuable upon conversion have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption.
Context and immediate market reaction
The announcement combined a financing structure that includes conversion features and capped call protection with disclosure that affiliated parties may transact in the company’s shares around the pricing. The securities are being placed privately and are unregistered under U.S. securities law, and the company has outlined a set of permissible uses for proceeds that range from derivative hedging instruments to potential strategic investments.
The stock movement in after-hours trading reflected investor response to the financing plan and associated mechanics described by the company.