Square greenshoe lifts 0.5% five-year convertibles to $862.5 million

By Wendy Van Sickle

Columbus, Ohio, May 25 – The underwriter for Square Inc.’s 0.5% convertible notes due May 15, 2023 fully exercised its $112.5 million over-allotment option on Thursday, increasing the total deal size to $862.5 million, according to an 8-K filing with the Securities and Exchange Commission.

As previously reported, Square priced $750 million of the convertibles after the market close on Tuesday at the cheap end of talk with an initial conversion premium of 42.5%.

Price talk had been for a coupon of 0% to 0.5% and an initial conversion premium of 42.5% to 47.5%.

Goldman Sachs & Co. is the bookrunner for the Rule 144A offering.

The notes are contingently convertible until Feb. 15, 2023.

The notes are non-callable and have no investor puts.

Conversions may be settled in cash, shares or a combination of both at the company’s option.

In connection with the pricing, Square will enter into convertible note hedge and warrant transactions.

The strike price on the warrant transactions is $109.26, which represents a premium of 100% over the last reported sales price of stock, according to a company news release.

Approximately $52.6 million of the proceeds will cover the cost of the call spread. Remaining proceeds will be used for general corporate purposes.

Square is a San Francisco-based mobile payment company.

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