JWCA advises Datadog INC ON ITS INAUGURAL $748 Million convertible and CApped CALL
MAY 2020 | read press release
Transaction Background
Datadog Inc. successfully raised $748mm (base of $650mm upsized by 18% from $550mm launch size) in the convertible market at very attractive terms (0.125% coupon and 37.5% conversion premium)
Notwithstanding elevated market volatility amidst an ongoing global health crisis, Datadog took advantage of market momentum for cloud collaboration and communication software companies to successfully execute its inaugural convertible and capped call execution
Datadog engaged J. Wood Capital Advisors to assist in the structuring, negotiation, documentation and execution of its transaction
JWCA provided extensive analysis for Datadog on deal structuring and related items, including:
Convertible structuring: redemption options and implications on overall economics
Derivative overlay: call spread vs capped call
Accounting and tax analysis/implications
Convertible and capped call documentation to ensure maximum value and future efficiency/flexibility for the company
Syndicate structure and precedent data
JWCA designed and ran a capped call auction process to achieve competitive terms
JWCA provided advice, support and analysis throughout the negotiation and execution process
Results
Datadog’s convertible issuance was very well-received by investors
The deal was upsized 18% to $650mm base size from original $550mm base deal size
The 0.125% coupon represented the low end of the marketed coupon range
The 37.5% conversion premium represented the high end of the marketed premium range
Achieved lowest coupon and third-highest conversion premium of all equity-linked issues post-COVID
Datadog’s stock price increased +0.5% on pricing day (compared to an average stock price decline of –3.7% for U.S. technology convertibles 2019-2020ytd)
Capped call documentation and auction process produced meaningful savings for Datadog, while maximizing flexibility for the Company