Datadog to Raise $870 Million Via Convertible Debt, Aims for Corporate Expansion and Debt Repurchase

On Tuesday, Datadog, Inc DDOG announced the pricing of $870 million 0% Convertible Senior Notes due 2029 in an upsized private placement.

The offering size increased from the previously announced offering of $775 million aggregate principal amount of notes.

Datadog also granted the notes’ initial purchasers an option to purchase up to an additional $130 million in aggregate principal amount.

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The sale of the notes is expected to close on December 12, 2024. Datadog estimates that the net proceeds from the offering will be approximately $851.6 million.

Datadog expects to use a portion of the net proceeds from the offering to pay the approximately $87.8 million cost of the capped call transactions and to repurchase for cash $112.0 million aggregate principal amount of its outstanding 0.125% Convertible Senior Notes due 2025.

Datadog expects to use the remaining net proceeds from the offering for general corporate purposes. The notes’ conversion rate will initially be 4.5955 shares per $1,000 principal, implying a premium of approximately 35%.

Datadog may redeem all or any portion of the notes for cash if the last reported sale price of the stock has been at least 130% of the conversion price for the notes, which has been in effect for at least 20 trading days.

Concurrently, Datadog entered into privately negotiated transactions with certain holders of the 2025 notes to repurchase, for approximately $196.8 million in cash, the $112.0 million aggregate principal amount of its 2025 notes.

Datadog held cash and equivalents of $3.2 billion as of September 30.

Datadog stock gained over 40% year-to-date. The company reported fiscal third-quarter topline growth of 26% to $690.02 million, beating the analyst estimate of $664.32 million. Adjusted EPS of 57 cents beat the analyst estimate of 40 cents. 

Datadog expects fourth-quarter revenue of $709 million–$713 million above the analyst consensus of $664.32 million. It projects an adjusted EPS of 42 cents–44 cents above the consensus estimate of 40 cents.

Investors can gain exposure to Datadog through WisdomTree Cybersecurity Fund WCBR and Spear Alpha ETF SPRX.

Price Action: DDOG stock is down 1.11% at $159.30 at the last check on Tuesday.

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