Cloudflare, Inc. announced the pricing of a private offering for $1.75 billion aggregate principal amount of 0% Convertible Senior Notes due 2030. The offering is being made to qualified institutional buyers under Rule 144A. Additionally, Cloudflare granted the initial purchasers a 13-day option to buy an extra $250 million in notes to cover over-allotments.
The sale of the notes is expected to settle on June 17, 2025, and is anticipated to generate approximately $1.72 billion in net proceeds for Cloudflare, assuming no exercise of the over-allotment option. Cloudflare plans to use these proceeds for general corporate purposes, including working capital, capital expenditures, debt repayment, and potential acquisitions or strategic transactions.
The notes will be convertible at an initial rate of 4.0376 shares of Cloudflare's Class A common stock per $1,000 principal amount, equating to an initial conversion price of approximately $247.67 per share. This represents a conversion premium of about 45% over the last reported sale price of $170.81 per share on June 12, 2025. The notes are senior, unsecured obligations of Cloudflare.
In connection with the offering, Cloudflare entered into capped call transactions with initial purchasers and financial institutions. These transactions are designed to offset potential dilution to Cloudflare’s Class A common stock upon conversion of the notes and/or reduce cash payments required in excess of the principal amount. The cap price for these transactions is initially about $469.73 per share, a premium of approximately 175% over the Class A common stock's June 12, 2025 closing price. Cloudflare intends to use a portion of the net proceeds from the offering to pay for these capped call transactions.
