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The Notes will be general unsecured obligations of Confluent and will accrue interest payable semiannually in arrears. The notes will be convertible into cash, shares of Confluent’s Class A common stock or a combination of cash and shares of Confluent’s Class A common stock, at Confluent’s election. The interest rate, initial conversion rate and other terms of the Notes will be determined at the time of pricing of the Offering.
Confluent expects to use a portion of the net proceeds from the Offering to pay the cost of the capped call transactions described below. Confluent expects to use the remaining net proceeds for working capital and other general corporate purposes. Confluent may also use a portion of the net proceeds for acquisitions of, or strategic investments in, complementary businesses, products, services, or technologies. If the initial purchasers exercise their option to purchase additional Notes, Confluent expects to use a portion of the net proceeds from the sale of the additional Notes to enter into additional capped call transactions with the Option Counterparties (as defined below) and the remaining net proceeds for working capital and other general corporate purposes and for acquisitions of, or strategic investments in, complementary businesses, products, services, or technologies. However, Confluent does not have any agreements or commitments to enter into any material acquisitions or investments at this time.
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In connection with the pricing of the Notes, Confluent expects to enter into capped call transactions with one or more of the initial purchasers or affiliates thereof and/or other financial institutions (the “Option Counterparties”). The capped call transactions will cover, subject to customary adjustments, the number of shares of Confluent’s Class A common stock initially underlying the Notes. The capped call transactions are expected generally to reduce the potential dilution to Confluent’s Class A common stock upon any conversion of Notes and/or offset any cash payments Confluent is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap.
In connection with establishing their initial hedges of the capped call transactions, Confluent expects the Option Counterparties or their respective affiliates will enter into various derivative transactions with respect to Confluent’s Class A common stock and/or purchase shares of Confluent’s Class A common stock concurrently with or shortly after the pricing of the Notes, including with, or from, as the case may be, certain investors in the Notes. This activity could increase (or reduce the size of any decrease in) the market price of Confluent’s Class A common stock or the trading price of the Notes at that time.
In addition, the Option Counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to Confluent’s Class A common stock and/or purchasing or selling Confluent’s Class A common stock or other securities of Confluent in secondary market transactions following the pricing of the Notes and prior to the maturity of the Notes (and are likely to do so during the 40 trading day period beginning on the 41st scheduled trading day prior to maturity of the Notes, or, to the extent Confluent exercises the relevant election under the capped call transactions, following any repurchase, redemption or conversion of the Notes). This activity could also cause or avoid an increase or a decrease in the market price of Confluent’s Class A common stock or the Notes which could affect a noteholder’s ability to convert the Notes and, to the extent the activity occurs during any observation period related to a conversion of Notes, this could affect the number of shares, if any, and value of the consideration that a noteholder will receive upon conversion of its Notes.
The Notes and any shares of Confluent’s Class A common stock potentially issuable upon conversion of the Notes have not been and will not be registered under the Securities Act, any state securities laws or the securities laws of any other jurisdiction, and unless so registered, may not be offered or sold in the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and other applicable securities laws.
This press release is neither an offer to sell nor a solicitation of an offer to buy any of these securities nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to the registration or qualification thereof under the securities laws of any such state or jurisdiction.
