Snowflake Announces Proposed Private Placement of $2.0 Billion in Convertible Senior Notes

Snowflake Inc. Announces Private Placement of Convertible Senior Notes

Snowflake Inc. (NYSE: SNOW), recognized as the AI Data Cloud Company, has announced its intention to offer, subject to market conditions and other factors, a total of $1.0 billion in Convertible Senior Notes due in 2027 and an additional $1.0 billion in Convertible Senior Notes due in 2029. This offering will be conducted as a private placement to qualified institutional buyers under Rule 144A of the Securities Act of 1933.

The notes will represent general unsecured obligations of Snowflake and will accrue interest payable semiannually. Upon conversion, Snowflake may choose to pay or deliver cash, shares of its Class A common stock, or a combination of both, at its discretion. The specific interest rate, initial conversion rate, and additional terms will be established at the time of the offering’s pricing.

The proceeds from this offering are intended to be used for several purposes: to fund the capped call transactions, repurchase up to $575 million of its common stock from purchasers of the notes, and for general corporate purposes. These corporate purposes may include further stock repurchases under Snowflake’s existing or future programs, as well as potential acquisitions or investments in complementary businesses or technologies, although no such plans are currently in place. If the initial purchasers exercise options to acquire additional notes, some proceeds from those sales will be utilized for further capped call transactions related to that specific series of notes.

In conjunction with pricing the notes, Snowflake plans to engage in capped call transactions with one or more initial purchasers or their affiliates. These transactions are aimed at covering the shares of common stock initially underlying the notes, subject to customary adjustments. Such transactions are expected to mitigate potential dilution of Snowflake’s common stock upon conversion of the notes.

Furthermore, to establish their initial hedges related to the capped call transactions, the option counterparties may enter into derivative transactions involving Snowflake’s common stock or acquire shares concurrently with the pricing of the notes. This activity may impact the market price of Snowflake’s common stock or the notes at that time.

After the pricing of the notes and prior to their maturity, the option counterparties might modify their hedge positions through various means, which could influence the market price of Snowflake’s common stock and the notes. This may affect a noteholder’s ability to convert the notes and impact the consideration received upon conversion.

Snowflake also anticipates using part of the offering’s net proceeds—up to $575 million—to repurchase its common stock from purchasers of the notes concurrently with the offering’s pricing. The repurchase price will match the closing stock price on the offering date. These repurchases will reduce the amount remaining under Snowflake’s authorized stock repurchase program, which was initially approved in February 2023 and further extended.

The capped call transactions and stock repurchases may influence the market price of Snowflake’s common stock, which could affect the trading price of the notes offered. However, Snowflake cannot predict the extent of this market activity or the overall impact on stock prices.

The notes and any shares of Snowflake’s common stock issued upon their conversion have not been registered under the Securities Act or any state laws. Thus, they may not be offered or sold in the United States without proper registration or exemption.

This announcement does not constitute an offer to sell or a solicitation to buy any securities, nor will there be sales in jurisdictions where such an offer would be unlawful before proper registration.