JWCA advises zscaler on its inaugural $1.15 billion convertible bond AND CAPPED CALL offering
june 2020 | read press release
Transaction Background
Zscaler Inc. successfully raised $1.15bn (inclusive of greenshoe) 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, Zscaler took advantage of market momentum for cloud collaboration, communication and security software companies to successfully execute its inaugural convertible and capped call execution
Zscaler engaged J. Wood Capital Advisors to assist in the structuring, negotiation, documentation and execution of its transaction
JWCA provided extensive analysis for Zscaler 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
Zscaler’s convertible issuance was very well-received by investors
The 0.125% coupon and 37.5% conversion premium represented the low end and high end of the respective marketed ranges
Achieved best coupon and conversion premium combination of all technology issues post-COVID
Zscaler’s stock price increased +1.0% on pricing day (compared to an average stock price decline of –3.3% for all technology convertibles issued since April)
Only three other first-time technology issuers had a positive stock price impact the day of pricing since April (out of 28 technology offerings)
Capped call documentation and auction process produced meaningful savings for Zscaler, while maximizing flexibility for the Company