Peloton Interactive Inc. announced the pricing of $875.0 million aggregate principal amount of convertible senior notes due 2026 in a private offering.
Peloton also granted the initial purchasers of the notes a 13-day option to purchase up to an additional $125.0 million aggregate principal amount of the notes. The sale of the notes to the initial purchasers is expected to settle on February 11, 2021, subject to customary closing conditions, and is expected to result in approximately $854.6 million in net proceeds to Peloton after deducting the initial purchasers’ discounts and commissions and estimated offering expenses payable by Peloton. The size of the offering was increased from the previously announced $600.0 million aggregate principal amount of the notes.
The notes will be senior, unsecured obligations of Peloton. The notes will not bear regular interest, and the principal amounts of the notes will not accrete. Interest will be payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2021. The notes will mature on February 15, 2026, unless earlier redeemed, repurchased or converted. Peloton may not redeem the notes prior to February 20, 2024.
The notes will be convertible at an initial conversion rate of 4.1800 shares of Peloton’s Class A common stock, per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $239.23 per share of Class A common stock, which represents a conversion premium of approximately 65 percent to the last reported sale price of $144.99 per share of Peloton’s Class A common stock on The Nasdaq Global Select Market on February 8, 2021).
Prior to the close of business on the business day immediately preceding August 15, 2025, the notes will be convertible at the option of the noteholders only upon the satisfaction of specified conditions and during certain periods. On or after August 15, 2025, until the close of business on the second scheduled trading day preceding the maturity date, the notes will be convertible at the option of the noteholders at any time regardless of these conditions.
In connection with the pricing of the notes, Peloton entered into privately negotiated capped call transactions with certain of the initial purchasers or their respective affiliates and/or other financial institutions. The capped call transactions are generally expected to reduce potential dilution to Peloton’s Class A common stock upon any conversion of the notes and/or offset any potential cash payments Peloton is required to make in excess of the principal amount of converted notes.
Peloton intends to use approximately $71.1 million of the net proceeds from the offering of the notes to pay the cost of the capped call transactions. If the initial purchasers exercise their option to purchase additional notes, Peloton expects to use a portion of the net proceeds from the sale of such additional notes to enter into additional capped call transactions with the option counterparties. Peloton intends to use the remainder of the net proceeds from the offering for general corporate purposes, which may include working capital, capital expenditures, including for the construction or expansion of facilities, and investments in and acquisitions of other companies, products or technologies that Peloton may identify in the future.
Photo courtesy Peloton
