SolarEdge Technologies, Inc. Announces Pricing of Private Offering of $300 Million of 2.25% Convertible Senior Notes due 2029
SolarEdge Technologies announced the pricing of a $300 million private offering of 2.25% Convertible Senior Notes due 2029. The notes are being offered to qualified institutional buyers under Rule 144A. An additional $45 million may be purchased within a 13-day option. The notes, bearing interest payable semiannually, will mature on July 1, 2029. The initial conversion rate is 29.1375 shares per $1,000 principal amount, with a conversion price of $34.32 per share, a 30% premium over the last reported price.
The net proceeds, estimated at $293.2 million, will partially fund capped call transactions to mitigate dilution upon conversion. Remaining funds will repurchase part of the 0.000% Convertible Notes due 2025 and for general corporate purposes. The capped call transactions could reduce dilution and offset cash payments exceeding the principal amount. These transactions might also affect SolarEdge's stock price due to hedge adjustments by option counterparties.
- Raised $300 million through a private offering, potentially increasing to $345 million.
- Proceeds will reduce dilution via capped call transactions and repurchase outstanding 2025 notes.
- Convertible notes will cause shareholder dilution.
- Interest expense from the new notes will impact financials.
- Convertible notes rank junior to secured debt, which increases risk.
Insights
The issuance of $300 million of 2.25% Convertible Senior Notes by SolarEdge Technologies is a notable financial maneuver with implications for both the company's balance sheet and stock performance. Convertible notes are a hybrid form of debt, providing the company with immediate capital while offering investors the potential for equity conversion based on specified conditions. This approach can be seen as a strategic way to access lower-cost capital compared to traditional debt due to the conversion feature that usually comes with a lower interest rate.
SolarEdge plans to use part of the proceeds to repurchase a portion of its existing 2025 Notes, indicating a restructuring of its debt profile. Refinancing older notes at a zero percent interest rate with new notes at 2.25% suggests that current conditions are less favorable, highlighting the importance of the new capital to manage upcoming maturities and reduce dilution risk via capped call transactions. These transactions could mitigate the impact of potential share dilution which is typically a concern for convertible notes holders.
The capped call transactions in particular, set at
For retail investors, understanding the implications of convertible notes is essential. These instruments offer potential upside through conversion but also introduce complexity related to interest rates, conversion terms and hedging activities that can affect stock price movements.
From a market perspective, the issuance of convertible senior notes suggests SolarEdge is leveraging favorable conditions for raising capital. The initial conversion price of approximately
The capped call transactions are particularly significant as they aim to reduce potential dilution. This move is likely to be well-received by existing shareholders worried about dilution impacting their equity value. By setting a cap, SolarEdge provides a clear signal of expected upper limits for stock prices, which adds a layer of predictability for investors. This strategy also aligns with the broader market trends where companies in high-growth sectors try to mitigate dilution risks while raising capital to fund expansion and innovation activities.
Given the intricate dynamics of capped call transactions and potential hedging activities, investors should be aware of how such financial maneuvers could affect stock liquidity and volatility. These movements may create short-term price fluctuations, but they also provide opportunities for strategic investments based on anticipated stock price trends.
The Notes will bear interest at a rate of
SolarEdge will not be able to redeem the Notes prior to June 28, 2027. On or after June 28, 2027, SolarEdge may redeem the Notes at its option if the last reported sale price of SolarEdge’s common stock has been at least
Holders of the Notes will have the right to require SolarEdge to repurchase all or a portion of their Notes upon the occurrence of a fundamental change (as defined in the indenture governing the Notes) in cash at a fundamental change repurchase price of
The Notes will be convertible based on an initial conversion rate of 29.1375 shares of SolarEdge’s common stock per
When issued, the Notes will be SolarEdge’s senior unsecured obligations and will rank senior in right of payment to any of SolarEdge’s unsecured indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to any of SolarEdge’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of SolarEdge’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of SolarEdge’s subsidiaries.
SolarEdge estimates that the net proceeds from the Offering will be approximately
Holders of the 2025 Notes that are repurchased in the concurrent repurchases described above may purchase shares of SolarEdge’s common stock in the open market to unwind any hedge positions they may have with respect to the 2025 Notes. These activities may increase (or reduce the size of any decrease in) the trading price of SolarEdge’s common stock and the initial conversion price of the Notes.
In connection with the pricing of the Notes, SolarEdge anticipates entering into capped call transactions (the “capped call transactions”) with certain of the initial purchasers or their respective affiliates (the “option counterparties”). The capped call transactions are expected generally to reduce the potential dilution to SolarEdge’s common stock upon any conversion of the Notes and/or offset any cash payments SolarEdge is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap initially equal to approximately
In connection with plans to establish their initial hedges of the capped call transactions, the option counterparties or their respective affiliates expect to purchase shares of SolarEdge’s common stock and/or enter into various derivative transactions with respect to SolarEdge’s common stock concurrently with or shortly after the pricing of the Notes. This activity could increase (or reduce the size of any decrease in) the market price of SolarEdge’s common stock or the Notes at that time.
In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to SolarEdge’s common stock and/or purchasing or selling SolarEdge’s common stock or other securities of SolarEdge in secondary market transactions following the pricing of the Notes and prior to the maturity of the Notes (and are likely to do so during the observation period for conversions of the Notes following April 1, 2029 and, to the extent that SolarEdge unwinds a corresponding portion of the capped call transactions, following an early conversion of the Notes or repurchase or redemption of the Notes). This activity could also cause or avoid an increase or a decrease in the market price of SolarEdge’s common stock or the Notes, which could affect the ability of holders to convert the Notes and, to the extent the activity occurs during any observation period related to a conversion of the Notes, it could affect the number of shares and value of the consideration that a holder will receive upon conversion of its Notes.
The Notes were offered only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act. The offer and sale of the Notes and any shares of common stock of SolarEdge issuable upon conversion of the Notes, if any, have not been, and will not be, registered under the Securities Act or the securities laws of any other jurisdiction, and unless so registered, the Notes and such shares, if any, may not be offered or sold in
This press release does not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any offer or sale of, the Notes (or any shares of common stock of SolarEdge issuable upon conversion of the Notes) in any state or jurisdiction in which the offer, solicitation, or sale would be unlawful prior to the registration or qualification thereof under the securities laws of any such state or jurisdiction.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified as such because the statements include information, among other things, concerning the satisfaction of customary closing conditions with respect to the Offering and capped call transactions and the anticipated use of the net proceeds of the Offering. These forward-looking statements are often characterized by the use of words such as “may,” “should,” “will,” “intend,” “expect,” “believe,” “anticipate” or other words of similar import.
The forward-looking statements contained in this press release are only predictions based on SolarEdge’s current expectations and SolarEdge’s projections about future events. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause SolarEdge’s actual results, levels of activity, performance or achievements (including in relation to the Offering and use of the net proceeds of the Offering) to be materially different from those expressed or implied by the forward-looking statements. Given these factors, you should not place undue reliance on these forward-looking statements. These factors include, but are not limited to, the matters discussed in the section entitled “Risk Factors” of SolarEdge’s Annual Report on Form 10-K for the year ended December 31, 2023, filed on February 26, 2024, Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed on May 9, 2024, Current Reports on Form 8-K and other reports filed with the Securities Exchange Commission. All forward-looking statements included in this release are given only as at the date hereof and SolarEdge assumes no obligation, and disclaims any duty, to update the forward-looking statements in this release.
You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. SolarEdge cannot guarantee future results, levels of activity, performance or achievements. SolarEdge is under no duty to update any of these forward-looking statements after the date of this release or to conform these statements to actual results or revised expectations.
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Investor Contacts
SolarEdge Technologies, Inc.
JB Lowe, Head of Investor Relations
investors@solaredge.com
or
Sapphire Investor Relations, LLC
Erica Mannion or Michael Funari
investors@solaredge.com
Source: SolarEdge Technologies, Inc.
FAQ
What is the purpose of SolarEdge's $300 million private offering?
When will SolarEdge's 2.25% Convertible Senior Notes mature?
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How will the capped call transactions affect SolarEdge shareholders?
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