Semtech Announces Private Exchanges of Convertible Notes Due 2028

Rhea-AI Summary

Semtech (Nasdaq: SMTC) has announced private exchange agreements to repurchase $183 million of its 4.00% Convertible Senior Notes due 2028. The repurchase will be executed by issuing shares of the company's common stock over an averaging period beginning July 12, 2024. The transactions are anticipated to close around July 24, 2024, pending customary closing conditions.

These shares will not be registered under the Securities Act of 1933 or other relevant securities laws, limiting their offer and sale in the United States absent proper registration or exemptions. This release does not constitute a sales offer or solicitation to buy any securities in any jurisdiction where such activities would be unlawful.

Positive

• Repurchase of $183 million in convertible notes reduces debt liability.
• Execution of stock issuance over an averaging period could mitigate market impact.

Negative

• Issuing new shares may lead to shareholder dilution.
• Convertible notes repurchase suggests potential near-term financial obligations.

Financial Analyst

The announcement by Semtech Corporation regarding the exchange of its 4.00% Convertible Senior Notes due 2028 for common stock has notable implications for investors. Firstly, this move helps to manage the company's debt profile by reducing the outstanding principal amount of the 2028 Notes by $183 million. This can improve the company's balance sheet and potentially lower interest expenses, enhancing profitability in the long term.

However, it's important to consider the impact of issuing common stock to complete this transaction. While it reduces debt, it dilutes the ownership percentage of existing shareholders, potentially affecting the stock price. Investors should watch for dilution metrics and understand that a larger share pool may reduce earnings per share (EPS) in the short term.

Moreover, the transaction's reliance on market conditions—since the final number of shares is determined over an averaging period—adds a layer of uncertainty. Investors should remain cautious about market volatility during this period.

Overall, this move can be seen as a strategic effort to strengthen Semtech's financial standing despite the trade-off of share dilution.

Market Research Analyst

From a market perspective, the exchange of convertible notes for common stock is a strategic maneuver that reflects Semtech's confidence in its stock performance. By opting for this exchange, Semtech signals to the market that they are willing to leverage equity to manage debt. This can be interpreted positively, indicating the company’s belief in the future performance and value of its shares.

Such transactions can also affect market sentiment. If the market perceives this move as a sign of strong financial health and strategic foresight, it could boost investor confidence and support stock price stability. Conversely, if investors are concerned about potential dilution, it might temporarily weigh on the stock price.

It is important to monitor how this exchange will influence Semtech’s market position and investor sentiment moving forward. Stakeholders should keep an eye on insider transactions and market reactions to gauge broader sentiment.

CAMARILLO, Calif.--(BUSINESS WIRE)-- Semtech Corporation (Nasdaq: SMTC), a high-performance semiconductor, IoT systems and cloud connectivity service provider, announced it has entered into separate, privately negotiated exchange agreements (the “Exchange Agreements”) with certain holders of its 4.00% Convertible Senior Notes due 2028 (the “2028 Notes”). Pursuant to these Exchange Agreements, the company agreed, subject to customary closing conditions, to repurchase an aggregate of approximately $183 million of the outstanding principal amount of the 2028 Notes for aggregate consideration consisting of a number of shares of the company’s common stock, par value $0.01 per share (the “Common Stock”), to be determined over an averaging period commencing on July 12, 2024. These exchange transactions (the “Exchanges”) are expected to close on or about July 24, 2024, subject to the satisfaction of customary closing conditions.

The shares of Common Stock issuable in the Exchanges have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state or other jurisdiction, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and such other jurisdictions. This press release shall not constitute an offer to sell, or a solicitation of an offer to buy any securities, nor shall there be any sale of, any securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful under the securities laws of any such state or jurisdiction.

Forward-Looking and Cautionary Statements

This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended, based on the Company's current expectations, estimates and projections about its operations, industry, financial condition, performance, results of operations, and liquidity. Forward-looking statements are statements other than historical information or statements of current condition and include, among others, statements regarding the Company’s plans and timing of the Exchanges; the number of Shares the Company expects to issue upon consummation of the Exchanges; whether the conditions for the closing of the Exchanges will be satisfied; and the Company's plans, objectives and expectations. Statements containing words such as “may,” “believes,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “estimates,” “should,” “could,” “will,” “designed to,” “projections,” or “business outlook,” or other similar expressions constitute forward-looking statements.

Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results and events to differ materially from those projected. Potential factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: whether the Company will be able to execute and complete the Exchanges in a timely manner if at all; the Company's ability to comply with, or pursue business strategies due to the covenants under the agreements governing its indebtedness; the Company's ability to forecast and achieve anticipated net sales and earnings estimates in light of periodic economic uncertainty; downturns in the business cycle; and decreased average selling prices of the Company's products. Additionally, forward-looking statements should be considered in conjunction with the cautionary statements contained in the risk factors disclosed in the Company's filings with the Securities and Exchange Commission (the “SEC”), including the Company's Annual Report on Form 10-K for the fiscal year ended January 28, 2024, which was filed with the SEC on March 28, 2024, as such risk factors may be amended, supplemented or superseded from time to time by subsequent reports the Company files with the SEC. In light of the significant risks and uncertainties inherent in the forward-looking information included herein that may cause actual performance and results to differ materially from those predicted, any such forward-looking information should not be regarded as representations or guarantees by the Company of future performance or results, or that its objectives or plans will be achieved or that any of its operating expectations or financial forecasts will be realized. Reported results should not be considered an indication of future performance. Investors are cautioned not to place undue reliance on any forward-looking information contained herein, which reflect management's analysis only as of the date hereof. Except as required by law, the Company assumes no obligation to publicly release the results of any update or revision to any forward-looking statements that may be made to reflect new information, events or circumstances after the date hereof or to reflect the occurrence of unanticipated or future events, or otherwise.

Semtech and the Semtech logo are registered trademarks or service marks of Semtech Corporation or its subsidiaries.

SMTC-F

View source version on businesswire.com: https://www.businesswire.com/news/home/20240711580282/en/

Sara Kesten

Semtech Corporation

(805) 480-2004

webir@semtech.com

Source: Semtech Corporation

FAQ

What is Semtech's recent announcement regarding convertible notes?

Semtech announced private exchange agreements to repurchase $183 million of its 4.00% Convertible Senior Notes due 2028 by issuing shares of common stock.

How will Semtech repurchase its 2028 Convertible Senior Notes?

Semtech will repurchase the notes by issuing common stock over an averaging period starting July 12, 2024.

When is Semtech's convertible notes exchange expected to close?

The exchange transactions are expected to close around July 24, 2024, subject to customary closing conditions.

What is the impact of Semtech's convertible notes exchange on shareholders?

Issuing new shares for the repurchase of convertible notes may lead to shareholder dilution.

Are the shares issued in Semtech's exchange registered under the Securities Act?

No, the shares issued in the exchange are not registered under the Securities Act of 1933 or under any other relevant securities laws.