DigitalOcean Holdings, Inc. (NYSE: DOCN) has announced its intention to offer $500 million in aggregate principal amount of convertible senior notes due 2030. The private offering is subject to market conditions and other factors, and the notes will be offered to qualified institutional buyers. The company also plans to grant the initial purchasers an option to buy an additional $75 million in notes. This financial move is part of DigitalOcean’s strategy to manage its capital structure and refinance existing debt.
DigitalOcean has proposed a private offering of $500 million in convertible senior notes due 2030.
The notes will be senior, unsecured obligations, with interest paid semi-annually.
Noteholders have the right to convert their notes to cash, common stock, or a combination, at DigitalOcean's discretion.
The company will use the proceeds to repurchase a portion of its existing 0.00% convertible senior notes due 2026.
A portion of the proceeds will also be used for capped call transactions to reduce potential stock dilution upon conversion.
A new stock repurchase program of up to $100 million has also been authorized.
The proposed notes will be senior, unsecured obligations of DigitalOcean, with interest accruing and payable semi-annually. The notes are set to mature on August 15, 2030. Noteholders will have the right to convert their notes into cash, shares of DigitalOcean’s common stock, or a combination of both, at the company’s election. The notes will not be redeemable before August 15, 2028, but can be redeemed by DigitalOcean after this date under specific conditions if the last reported sale price of its common stock exceeds 130% of the conversion price for a specified period. The final terms, including the interest rate and initial conversion rate, will be determined at the time of the offering’s pricing
DigitalOcean intends to use the net proceeds from this offering for strategic financial purposes. A primary goal is to use the funds to repurchase a portion of its existing 0.00% convertible senior notes due 2026 in privately negotiated transactions. This move aims to manage and refinance the company's debt portfolio. Additionally, a portion of the proceeds will be used to pay for capped call transactions. These transactions are expected to help reduce the potential dilution to the company's common stock that could occur if noteholders choose to convert their notes. In connection with the offering, DigitalOcean also plans to adopt a new stock repurchase program, authorizing the repurchase of up to $100 million of its common stock, further demonstrating a commitment to capital management.
DigitalOcean’s proposed offering of convertible senior notes is a strategic financial maneuver aimed at optimizing its debt structure and providing flexibility for future corporate initiatives. By using the proceeds to refinance a portion of its existing notes and to enter into capped call transactions, the company is proactively managing potential dilution and strengthening its financial position. The concurrent authorization of a new stock repurchase program also underscores the company’s commitment to disciplined capital allocation and delivering value.
DigitalOcean is the simplest scalable cloud platform that democratizes cloud and AI for digital native enterprises around the world. Our mission is to simplify cloud computing and AI to allow builders to spend more time creating software that changes the world. More than 600,000 customers trust DigitalOcean to deliver the cloud, AI, and ML infrastructure they need to build and scale their organizations.
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