PagerDuty greenshoe lifts 1.5% convertibles to $402.5 million

By Wendy Van Sickle

Columbus, Ohio, Oct. 13 – Underwriters for PagerDuty Inc.’s 1.5% five-year convertible notes fully exercised their $52.5 million greenshoe, increasing the total size of the deal to $402.5 million, according to an 8-K filing with the Securities and Exchange Commission.

The company priced an initial $350 million of the convertibles after the market close on Oct. 10 at par with an initial conversion premium of 27.5%, as previously reported.

Pricing came at the midpoint of talk for a coupon of 1.25% to 1.75% and at the cheap end of talk for an initial conversion premium of 27.5% to 32.5%.

J.P. Morgan Securities LLC, Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC and BofA Securities Inc. were bookrunners for the Rule 144A offering.

The notes are non-callable until Oct. 20, 2026 and then subject to a 130% hurdle.

They are putable upon a fundamental change.

There is dividend protection above $0.00 per quarter.

The notes will be settled in cash up to the principal amount with any remaining amount to be settled in cash, shares or a combination of both at the company’s option.

In connection with the offering, the company entered into capped call transactions with a cap price of $42.90, which represents a premium of 100% over the last reported sales price of stock.

The company also entered into privately negotiated transactions to repurchase $230 million in principal of its outstanding 1.25% convertible notes due 2025 for $224.5 million in cash.

Net proceeds will be $390.4 million with the greenshoe.

Proceeds will be used to fund the cost of the call spread, repurchase the 2025 notes, and repurchase approximately $50 million in common stock for $21.45 in privately negotiated transactions.

Remaining proceeds will be used for general corporate purposes, which may include acquisitions and strategic transactions.

PagerDuty is a San Francisco-based cloud computing company.

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