Slack greenshoe exercised, lifts 0.5% convertibles to $862.5 million

By Wendy Van Sickle

Columbus, Ohio, April 9 – Underwriters for Slack Technologies Inc.’s 0.5% convertible notes due April 15, 2025 fully exercised their $112.5 million greenshoe, lifting the total deal size to $862.5 million, according to an 8-K filing with the Securities and Exchange Commission.

The company priced an upsized $750 million of the convertibles after the market close on Monday at par with an initial conversion premium of 27.5%, according to a company news release.

Pricing came on the rich end of talk for a coupon of 0.5% to 1% and at the midpoint of talk for an initial conversion premium of 25% to 30%, according to a market source.

Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC are the joint bookrunners for the Rule 144A deal.

The initial size of the offering was $600 million with a greenshoe of $90 million.

The notes are non-callable until April 20, 2023 and then subject to a 130% hurdle with a make-whole.

The notes are putable upon a fundamental change.

In connection with the pricing of the notes, Slack entered into capped call transactions with a cap price of $48.62 per share, which represents a premium of 100% over the last reported sales price of stock.

Approximately $91.8 million of the proceeds will be used to cover the cost of the call spread, plus an additional $13.8 million from the greenshoe.

Remaining proceeds will be used for working capital and for general corporate purposes, which may include potential acquisitions and strategic transactions.

Slack is a San Francisco-based business communication software company.

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