Dropbox Announces $1B Private Placement Of Convertible Senior Notes Due 2031

 Dropbox also expects to grant the initial purchasers of the Notes a 13-day option to purchase up to an additional $150.0 million aggregate principal amount of the Notes.

The Notes will be senior, unsecured obligations of Dropbox, and interest will be payable semi-annually in arrears. Upon conversion, Dropbox will pay cash up to the aggregate principal amount of Notes to be converted and pay or deliver, as the case may be, cash, shares of Dropbox’s Class A common stock ("Class A common stock") or a combination of cash and shares of Class A common stock, at Dropbox’s election, in respect of the remainder, if any, of Dropbox’s conversion obligation in excess of the aggregate principal amount of Notes being converted. The interest rate, conversion rate, and other terms of the Notes are to be determined upon pricing of the offering.

Dropbox intends to use a portion of the net proceeds of the offering of the Notes to pay the cost of the convertible note hedge transactions described below (after such cost is partially offset by the proceeds to Dropbox from the warrant transactions described below) and to repurchase approximately $175.0 million of the Class A common stock from institutional investors through one of the initial purchasers of the Notes or their affiliates, as Dropbox’s agent, concurrently with the pricing of the Notes. Dropbox expects to use the remaining proceeds from the offering, together with cash on hand, for the repayment of at least $750.0 million aggregate principal amount of outstanding borrowings under its term loan facility.

In connection with the pricing of the Notes, Dropbox expects to enter into privately negotiated convertible note hedge and warrant transactions with one or more of the initial purchasers or their affiliates and/or other financial institutions (the "option counterparties"). The convertible note hedge transactions are expected generally to offset the potential dilution to the Class A common stock upon any conversion of the Notes and/or reduce any cash payments Dropbox is required to make in excess of the principal amount of converted Notes, as the case may be. The warrant transactions would separately have a dilutive effect to the extent that the market value per share of the Class A common stock exceeds the strike price of any warrants unless, subject to the terms of the warrant transactions, Dropbox elects to cash settle instead of net share settle the warrants. If the initial purchasers exercise their option to purchase additional Notes, Dropbox expects to enter into additional convertible note hedge and additional warrant transactions relating to the additional Notes.