KING OF PRUSSIA, Pa. - Vertex (NASDAQ:VRTX), Inc. (NASDAQ: VERX), a prominent player in the global indirect tax solutions market, announced the successful pricing of $300 million in 0.750% convertible senior notes due May 1, 2029. The offering, originally set at $250 million, was upsized due to strong investor demand, and includes an option for initial purchasers to buy up to an additional $45 million in notes within 13 days of issuance.
The notes, unsecured senior obligations of the company, will pay interest semi-annually and are set to mature on May 1, 2029, unless repurchased, redeemed, or converted earlier under specific conditions.
Prior to November 1, 2028, conversions of the notes are subject to certain conditions and timeframes; thereafter, they can be converted at any time until the second scheduled trading day before the maturity date. The conversion rate is initially set at 27.5315 shares of Class A Common Stock per $1,000 principal amount of notes, which equates to an initial conversion price of approximately $36.32 per share.
The conversion price represents a 30% premium to Vertex's Class A Common Stock's last reported sale price of $27.94 on April 23, 2024, on The NASDAQ Global Market. The notes are non-redeemable before May 5, 2027, but may be redeemable on or after this date under certain conditions.
Vertex anticipates net proceeds of approximately $290 million, after discounts and estimated expenses, assuming no additional notes are purchased. Approximately $36.8 million of the proceeds will fund capped call transactions to minimize potential dilution or offset cash payments upon conversion of the notes. The remainder is earmarked for general corporate purposes, which may include potential acquisitions, although no specific plans have been disclosed.
Capped call transactions have been entered into with certain initial purchasers and/or their affiliates, covering shares underlying the notes. The cap price of these transactions is initially $55.88 per share, a 100% premium over the April 23 closing price. These transactions may reduce dilution or offset cash payments upon conversion of the notes unless the market price exceeds the cap price.
In connection with the capped call transactions, counterparties may buy Vertex's Class A Common Stock and engage in derivative transactions, which could affect the stock's market price. The notes and the shares of Class A Common Stock potentially issuable upon conversion will be offered to qualified institutional buyers under Rule 144A and will not be registered under the Securities Act, thus requiring an exemption for sale in the U.S.
This press release is based on a press release statement and contains forward-looking statements subject to risks, including the possibility that the transactions may not be completed as planned. Vertex's filings with the Securities and Exchange Commission provide further details on these risks.
InvestingPro Insights
As Vertex, Inc. (NASDAQ: VERX) navigates the financial markets with its recent convertible notes offering, real-time data and expert analysis from InvestingPro provide a deeper look into the company's financial health and market position. With a market capitalization of $4.31 billion, Vertex is a significant entity in the tax solutions space.
Despite a negative P/E ratio of -325.47, which reflects the company's challenges in generating net profits over the last twelve months, analysts are optimistic about Vertex's prospects. According to InvestingPro, net income is expected to grow this year, and two analysts have revised their earnings upwards for the upcoming period, signaling potential improvements in the company's financial performance.
Investors considering Vertex's convertible notes should note that the company operates with a moderate level of debt, suggesting a balanced approach to leveraging. Meanwhile, the company's strong return over the last three months, with a price total return of 23.01%, and a substantial six-month price uptick of 28.82%, indicate robust short-term performance. This positive momentum could be a sign of investor confidence in Vertex's strategy and growth potential.
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