Cardlytics Prices $150.0 Million Convertible Senior Notes Offering

Rhea-AI Summary

Cardlytics, Inc. (NASDAQ: CDLX) announced the pricing of $150.0 million aggregate principal amount of 4.25% convertible senior notes due 2029 in a private offering. The notes will accrue interest at a rate of 4.25% per annum, payable semi-annually. Cardlytics estimates net proceeds of approximately $144.5 million, intending to use it to repurchase $183.9 million of its 1.00% convertible senior notes due 2025.

Insights

Financial Analyst

Cardlytics' decision to issue $150 million in convertible senior notes is a strategic move to restructure its debt, given the concurrent repurchase of its 1.00% convertible senior notes due 2025. The use of the proceeds to manage existing obligations indicates a proactive approach to balance sheet management. The new notes offer a higher interest rate of 4.25%, which could attract investors seeking fixed income in a potentially rising interest rate environment. However, the higher interest rate also suggests an increased cost of capital for Cardlytics, which may affect their net interest margin and profitability.

The conversion feature, with an initial conversion price set at a 32.5% premium over the last reported sale price of the common stock, is designed to minimize immediate dilution and could be appealing to investors bullish on Cardlytics' future stock performance. It's important to note that the potential for dilution exists if the notes are converted into equity, which could impact current shareholders. The impact on the stock will largely depend on the market's perception of Cardlytics' growth prospects and its ability to manage the increased debt load.

Market Research Analyst

Cardlytics' private offering of convertible notes may signal to the market an anticipation of growth or a need for capital for strategic investments. The repurchase of the 2025 Notes could be viewed positively as it may reduce the near-term financial burden and potential dilution from those notes. However, the introduction of new debt with a higher interest rate must be justified by the company's future performance to maintain investor confidence.

Furthermore, the potential market activities by the hedged holders of the 2025 Notes could lead to short-term volatility in Cardlytics' stock price. Investors should monitor the average daily trading volume of Cardlytics’ stock and the company's disclosures regarding these transactions to gauge the potential impact. The unwinding of hedge positions often creates additional trading volume, which can have a temporary effect on stock price, independent of the company's fundamentals.

Legal Expert

The offering is being conducted under Rule 144A, which allows for the sale of securities to qualified institutional buyers without the need for public registration. This approach can expedite the capital raising process but also limits the pool of potential investors to those who are deemed sophisticated enough to understand the risks. The lack of public registration also means less disclosure, which could affect market transparency.

The stipulation that the notes cannot be redeemed prior to maturity gives Cardlytics less flexibility in managing its debt portfolio, which could be a disadvantage if interest rates decline or if the company's financial position improves significantly prior to 2029. The 'fundamental change' clause, which allows noteholders to require repurchase, introduces a potential cash outflow risk in the event of significant corporate changes, such as a takeover or a major restructuring.

ATLANTA, March 26, 2024 (GLOBE NEWSWIRE) -- Cardlytics, Inc. (NASDAQ: CDLX) (“Cardlytics”), an advertising platform in banks’ digital channels, today announced the pricing of its offering of $150.0 million aggregate principal amount of 4.25% convertible senior notes due 2029 (the “notes”) in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The issuance and sale of the notes are scheduled to settle on April 1, 2024, subject to customary closing conditions. Cardlytics also granted the initial purchasers of the notes an option to purchase, for settlement within a period of 13 days from, and including, the date the notes are first issued, up to an additional $22.5 million aggregate principal amount of notes.

The notes will be senior, unsecured obligations of Cardlytics and will accrue interest at a rate of 4.25% per annum, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2024. The notes will mature on April 1, 2029, unless earlier converted or repurchased by Cardlytics. Before January 2, 2029, noteholders will have the right to convert their notes only upon the occurrence of certain events. From and after January 2, 2029, noteholders may convert their notes at any time at their election until the close of business on the scheduled trading day immediately before the maturity date. Cardlytics will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at Cardlytics’ election. The initial conversion rate is 55.4939 shares of common stock per $1,000 principal amount of notes, which represents an initial conversion price of approximately $18.02 per share of common stock. The initial conversion price represents a premium of approximately 32.5% over the last reported sale price of $13.60 per share of Cardlytics’ common stock on March 26, 2024. The conversion rate and conversion price will be subject to adjustment upon the occurrence of certain events.

The notes will not be redeemable at Cardlytics’ option prior to maturity. If a “fundamental change” (as defined in the indenture for the notes) occurs, then, subject to a limited exception, noteholders may require Cardlytics to repurchase their notes for cash. The repurchase price will be equal to the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date.

Cardlytics estimates that the net proceeds from the offering will be approximately $144.5 million (or approximately $166.3 million if the initial purchasers fully exercise their option to purchase additional notes), after deducting the initial purchasers’ discounts and commissions and Cardlytics’ estimated offering expenses.

Cardlytics expects to use approximately $169.3 million, consisting of the net proceeds from the offering, together with cash on hand, to repurchase for cash approximately $183.9 million aggregate principal amount of its 1.00% convertible senior notes due 2025 (the “2025 Notes”), together with accrued and unpaid interest, in privately negotiated transactions entered into concurrently with the pricing of the offering through one of the initial purchasers or its affiliate, as Cardlytics’ agent (each, a “note repurchase transaction”). This press release is not an offer to repurchase the 2025 Notes, and the offering of the notes is not contingent upon the repurchase of the 2025 Notes.

In connection with any note repurchase transaction, Cardlytics expects that holders of the 2025 Notes who agree to have their 2025 Notes repurchased and who have hedged their equity price risk with respect to such notes (the “hedged holders”) will unwind all or part of their hedge positions by buying Cardlytics’ common stock and/or entering into or unwinding various derivative transactions with respect to Cardlytics’ common stock. The amount of Cardlytics’ common stock to be purchased by the hedged holders or in connection with such derivative transactions may be substantial in relation to the historic average daily trading volume of Cardlytics’ common stock. This activity by the hedged holders could have increased (or reduced the size of any decrease in) the market price of Cardlytics’ common stock, including concurrently with the pricing of the notes, which could have resulted in a higher effective conversion price of the notes. Cardlytics cannot predict the magnitude of such market activity or the overall effect it will have on the price of the notes offered or Cardlytics’ common stock.

The offer and sale of the notes and the shares of common stock issuable upon conversion of the notes, if any, have not been, and will not be, registered under the Securities Act or any other securities laws of any other jurisdiction, and the notes and any such shares cannot be offered or sold in the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any other applicable securities laws. This press release does not constitute an offer to sell, nor a solicitation of an offer to buy, the notes or any shares of common stock issuable upon conversion of the notes, nor will there be any sale of the notes or any such shares, in any state or other jurisdiction in which such offer, sale or solicitation would be unlawful.

About Cardlytics, Inc.

Cardlytics, Inc. (NASDAQ: CDLX) is a digital advertising platform. Cardlytics partners with financial institutions to run their banking rewards programs that promote customer loyalty and deepen relationships. In turn, Cardlytics has a secure view into where and when consumers are spending their money. Cardlytics uses these insights to help marketers identify, reach, and influence likely buyers at scale, as well as measure the true sales impact of marketing campaigns. Headquartered in Atlanta, Cardlytics has offices in Menlo Park, Los Angeles, New York, and London.

Forward-Looking Statements

This press release includes forward-looking statements, including statements regarding the completion, timing and size of the proposed offering and the note repurchase transactions, the expected amount and intended use of the net proceeds and the potential impact of the foregoing or related transactions on dilution to holders of Cardlytics’ common stock and the market price of Cardlytics’ common stock or the notes or the conversion price of the notes. Forward-looking statements represent Cardlytics’ current expectations regarding future events and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those implied by the forward-looking statements. Among those risks and uncertainties are market conditions, Cardlytics’ ability to complete the proposed offering on the expected terms, or at all, whether and on what terms Cardlytics may repurchase any of the 2025 Notes and risks relating to Cardlytics’ business, including those described in Cardlytics’ Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2024 and in subsequent periodic reports that Cardlytics files with the Securities and Exchange Commission. Cardlytics may not be able to satisfy the closing conditions related to the offering and cannot provide any assurances regarding its ability to effectively apply the net proceeds as described above. The forward-looking statements included in this press release speak only as of the date of this press release, and Cardlytics does not undertake to update the statements included in this press release for subsequent developments, except as may be required by law.

Contacts:

Public Relations:
pr@cardlytics.com

Investor Relations:
ir@cardlytics.com

FAQ

What is the aggregate principal amount of the convertible senior notes due 2029 offered by Cardlytics?

Cardlytics announced the pricing of $150.0 million aggregate principal amount of 4.25% convertible senior notes due 2029.

What is the interest rate on the notes?

The notes will accrue interest at a rate of 4.25% per annum, payable semi-annually.

What are Cardlytics' estimated net proceeds from the offering?

Cardlytics estimates that the net proceeds from the offering will be approximately $144.5 million.

How does Cardlytics plan to utilize the net proceeds from the offering?

Cardlytics expects to use approximately $169.3 million, consisting of the net proceeds from the offering, together with cash on hand, to repurchase for cash approximately $183.9 million aggregate principal amount of its 1.00% convertible senior notes due 2025.

When will the notes mature?

The notes will mature on April 1, 2029, unless earlier converted or repurchased by Cardlytics.