Cloudflare announced an offering of up to $1.15 billion in convertible notes that can be converted into stock in the content delivery network.
Convertible notes are convertible into Cloudflare stock and mature in 2026. They are senior convertible notes, which means they supersede all other debt securities issued by Cloudflare.
Cloudflare intends to use the proceeds for “general corporate purposes” and to offer purchasers capped call transactions – that is, stock at a price that caps the buyer’s maximum profit.
CDNs just became visible
Cloudflare, Akamai, and Fastly are all content delivery networks that improve network performance by acting as a proxy and delivering content locally. They typically operate invisibly, but have become more visible recently as a result of Akamai and Fastly outages earlier this year. Cloudflare experienced a brief outage in June, following more serious issues in 2020 and 2019.
As CDNs are frequently used at multiple levels by services, it has been noted that they can create single points of failure for users. Recent outages, on the other hand, have generally boosted CDN stocks by raising investor awareness of their importance – although Fastly lost a significant customer and saw revenue decline following its June outage.
Cloudflare note purchasers will receive semi-annual interest in arrears and will be able to convert their notes into cash, shares of Cloudflare’s Class A stock, or a combination of the two – at Cloudflare’s discretion. The notes’ interest rate, conversion factor, and other terms have not yet been disclosed. Not all purchasers will be invited to participate in the “capped call” transactions in which they will receive a specified number of Class A shares. The purpose of this is to prevent Cloudflare’s stock from being diluted.
Cloudflare has committed to repaying all carbon emissions incurred over the course of its 15-year existence over the next four years.