PagerDuty to raise $350 million in private placement of convertible notes

PagerDuty, Inc. (NYSE: PD), a leading provider of digital operations management solutions, announced today that it plans to offer $350 million of convertible senior notes due 2028 in a private placement to qualified institutional buyers.

The company also intends to grant the initial purchasers an option to buy up to an additional $2.5 million of notes.

The notes will be unsecured obligations of PagerDuty and will bear interest semiannually. The notes will be convertible into cash, shares of PagerDuty’s common stock or a combination of both, at PagerDuty’s discretion. The interest rate, conversion rate, repurchase or redemption rights and other terms of the notes will be determined at the time of pricing.

PagerDuty expects to use some of the net proceeds from the offering to pay for capped call transactions that will limit the potential dilution from the conversion of the notes. The company also expects to use some of the net proceeds to buy back some of its 1.25% convertible senior notes due 2025 and some of its common stock. The remaining net proceeds will be used for working capital or other general corporate purposes, which may include potential acquisitions and strategic transactions.

PagerDuty also announced that it has entered into privately negotiated capped call transactions with some of the initial purchasers or their affiliates and/or other financial institutions. The capped call transactions will cover the number of shares that will initially underlie the notes and will offset the potential dilution from the conversion of the notes, subject to a cap. If the initial purchasers exercise their option to buy more notes, PagerDuty expects to enter into more capped call transactions.

The offering is subject to market conditions and other factors and there is no assurance that PagerDuty will be able to complete the offering.

PagerDuty also reaffirmed its guidance for the third quarter of 2023, which it previously announced. The company expects to report its financial results for the third quarter in November.