Nutanix Proposed $400 Million Convertible Senior Notes Offering

Nutanix, Inc. announced its intention to offer, subject to market conditions and other factors, $400 million aggregate principal amount of convertible senior notes due 2023 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

The firm also expects to grant the initial purchasers an option to purchase up to an additional $60 million aggregate principal amount of the notes within a 13-day period from, and including, the initial issuance date of the notes.

The notes will be unsecured senior obligations. Interest will be payable semi-annually in arrears. The notes will be convertible at the option of holders, subject to certain conditions and during certain periods, into cash, shares of Nutanix’s Class A common stock or a combination of cash and shares of common stock, at the election of Nutanix.

The interest rate, initial conversion rate and other terms of the notes are to be determined upon pricing of the offering.

The company intends to use a portion of the net proceeds of the offering to pay the cost of the convertible note hedge transactions described below (after such cost is partially offset by the proceeds to Nutanix of the warrant transactions described below) and to use the remaining proceeds of the offering for general corporate purposes, including working capital, capital expenditures and potential acquisitions. From time to time, the firm evaluate potential acquisitions of businesses, technologies or products. Currently, however, it does not have any definitive agreements with respect to any pending material acquisitions.

In connection with the pricing of the notes, Nutanix plans to enter into convertible note hedge and warrant transactions with one or more of the initial purchasers or their affiliates or other financial institutions (the option counterparties). The convertible note hedge transactions are generally expected to reduce potential dilution to the common stock upon any conversion of notes and/or offset any cash payments Nutanix is required to make in excess of the principal amount of converted notes, as the case may be. However, the warrant transactions could separately have a dilutive effect to the extent that the market value per share of common stock exceeds the strike price of any warrants. If the initial purchasers exercise their option to purchase additional notes, Nutanix may enter into additional convertible note hedge and additional warrant transactions relating to the additional notes. In connection with establishing their initial hedge of the convertible note hedge and warrant transactions, the option counterparties or their respective affiliates expect to purchase shares of the common stock and/or enter into various derivative transactions with respect to the common stock concurrently with or shortly after the pricing of the notes. This activity could increase (or reduce the size of any decrease in) the market price of the common stock or the notes at that time.

In addition, the option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to the common stock and/or purchasing or selling the common stock 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 any observation period related to a conversion of notes or following any repurchase of notes by Nutanix on any fundamental change or repurchase date or otherwise). This activity could also cause or avoid an increase or a decrease in the market price of the common stock or the notes, which could affect the ability of noteholders to convert the notes and, to the extent the activity occurs during any observation period related to a conversion of notes, it could affect the amount and value of the consideration that noteholders will receive upon conversion of such notes.