Akamai Announces Proposed Offering of Convertible Senior Notes

Rhea-AI Summary

Akamai Technologies (NASDAQ: AKAM) has announced a proposed offering of $1.35 billion in convertible senior notes due 2033, with an additional option for purchasers to buy up to $202.5 million more. The notes will be sold exclusively to qualified institutional buyers under Rule 144A. The company plans to use the proceeds to: • Repay $250 million in borrowings from its revolving credit facility • Service its existing $1.15 billion convertible notes due 2027 • Repurchase approximately $275 million of common stock • Fund convertible note hedge transactions The notes will pay interest semi-annually starting November 15, 2025, and mature on May 15, 2033. Holders can require Akamai to repurchase the notes on May 15, 2031, under specific conditions.

Positive

• Strategic debt refinancing to manage existing obligations and extend maturity profile
• $275 million share repurchase program shows commitment to returning value to shareholders
• Convertible note hedge transactions will help reduce potential dilution from the notes conversion

Negative

• Significant increase in debt obligations with $1.35 billion new notes offering
• Potential dilution risk for shareholders if warrants are exercised and stock price exceeds strike price
• Additional interest payment obligations could impact cash flow

Insights

Financial Analyst

Akamai raising $1.35B through convertible notes to refinance debt and repurchase shares, with hedging to minimize dilution.

Akamai is making significant financial moves with its proposed $1.35 billion convertible senior notes offering due 2033, with potential for an additional $202.5 million if initial purchasers exercise their option. The transaction appears strategically designed to manage the company's debt profile while returning value to shareholders.

The proceeds will be allocated to three main purposes: repaying $250 million outstanding under their revolving credit facility, preparing to address the upcoming maturity of $1.15 billion in convertible notes due September 2027, and funding approximately $275 million in share repurchases from note purchasers.

The structure includes sophisticated financial engineering with convertible note hedge and warrant transactions designed to offset potential dilution from the notes' conversion feature. This hedging strategy is a common approach for companies issuing convertible debt to protect existing shareholders from dilution while still offering conversion potential to noteholders.

From a balance sheet perspective, this represents a refinancing of existing obligations rather than a significant increase in leverage. The 2033 maturity provides Akamai with extended debt runway, though investors should note the 2031 optional repurchase provision that effectively shortens the practical maturity.

The $275 million share repurchase component signals management confidence in the company's valuation, effectively returning capital to shareholders concurrent with the debt issuance. The pricing of these repurchases at market price (rather than at a premium) is noteworthy, suggesting this is primarily financial engineering rather than an aggressive share buyback program.

Terms including interest rate and conversion price remain to be determined at pricing, which will ultimately define the attractiveness of this offering to qualified institutional buyers and its long-term impact on Akamai's capital structure.

CAMBRIDGE, Mass., May 13, 2025 /PRNewswire/ -- Akamai Technologies, Inc. (NASDAQ: AKAM) ("Akamai"), the cybersecurity and cloud computing company that powers and protects business online, today announced that it proposes to offer, subject to market factors and other conditions, $1.35 billion in aggregate principal amount of convertible senior notes due 2033. The notes are to be sold only to persons reasonably believed to be "qualified institutional buyers" pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). In addition, Akamai will grant the initial purchasers of the notes an option to purchase up to an additional $202.5 million in aggregate principal amount of notes on the same terms and conditions. Upon conversion, Akamai will pay cash up to the aggregate principal amount of the notes to be converted and pay or deliver, as the case may be, cash, shares of Akamai's common stock or a combination of cash and shares of common stock, at Akamai's election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the notes being converted. Interest on the notes will be payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2025. The notes will mature on May 15, 2033, unless earlier repurchased or converted in accordance with their terms prior to such date. The interest rate, initial conversion rate, offering price and other terms will be determined at the time of pricing the offering. The notes will be senior unsecured obligations of Akamai.

Subject to costs and expenses related to the convertible note hedge and warrant transactions and share repurchases described below, Akamai intends to use the remaining net proceeds from the offering to repay approximately $250.0 million in borrowings outstanding under its five-year senior unsecured revolving credit facility and repay at maturity a portion of its $1.15 billion outstanding aggregate principal amount of 0.375% Convertible Senior Notes due 2027, which mature on September 1, 2027, and/or to pay cash amounts due upon any earlier conversion thereof.

Akamai intends to use a portion of the net proceeds from this offering to pay the cost of the convertible note hedge transactions described below (after such cost is partially offset by the proceeds to Akamai from the sale of warrants pursuant to the warrant transactions described below). If the initial purchasers exercise their option to purchase additional notes, Akamai expects to sell additional warrants to one or more of the initial purchasers of the notes and/or their respective affiliates and/or other financial institutions (the "Option Counterparties") and use a portion of the net proceeds from the sale of such additional notes, together with the proceeds from the additional warrant transactions, to enter into additional convertible note hedge transactions with the Option Counterparties.

Akamai also intends to use approximately $275.0 million of the net proceeds from the offering to repurchase shares of its common stock from purchasers of the notes in the offering in privately-negotiated transactions effected through one or more of the initial purchasers or their affiliates. Akamai expects the purchase price per share in such transactions to equal the closing price per share of Akamai's common stock on the date of pricing of the offering. The amount of Akamai's common stock that Akamai actually repurchases may be more or less than $275.0 million.

Holders may require Akamai to repurchase for cash all or any portion of their notes on May 15, 2031 (the "optional repurchase date"), if the last reported sale price of Akamai's common stock on the trading day immediately preceding the business day immediately preceding the optional repurchase date is less than the conversion price, at an optional repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the optional repurchase date. In addition, if Akamai undergoes a fundamental change prior to the maturity date of the notes, subject to certain conditions and limited exceptions, holders may require Akamai to repurchase for cash all or any portion of their notes at a fundamental change repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

In connection with the pricing of the notes, Akamai expects to enter into convertible note hedge transactions and warrant transactions with the Option Counterparties. The convertible note hedge transactions will cover, subject to anti-dilution adjustments substantially similar to those applicable to the notes, the same number of shares of Akamai's common stock that will initially underlie the notes, including any notes purchased by the initial purchasers pursuant to their option to purchase additional notes. The convertible note hedge transactions are expected generally to reduce the potential dilution with respect to Akamai's common stock upon conversion of the notes and/or to offset any cash payments Akamai is required to make in excess of the principal amount of converted notes, as the case may be. The warrants will cover, subject to customary anti-dilution adjustments, the same number of shares of Akamai's common stock. The warrant transactions could separately have a dilutive effect with respect to Akamai's common stock to the extent that the market price per share of Akamai's common stock exceeds the strike price of the warrants, unless Akamai elects, subject to certain conditions, to settle the warrants in cash.

In connection with establishing their initial hedge of the convertible note hedge and warrant transactions, the Option Counterparties and/or their respective affiliates expect to purchase shares of Akamai's common stock and/or enter into various derivative transactions with respect to Akamai's 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 Akamai's 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 Akamai's common stock and/or purchasing or selling Akamai's common stock or other securities of Akamai 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 the notes or following any repurchase of the notes by Akamai). This activity could also cause or avoid an increase or a decrease in the market price of Akamai's common stock or the notes, which could affect the ability of holders to convert the notes and, to the extent the activity occurs during any observation period related to a conversion of the notes, it could affect the amount and value of the consideration that holders receive upon conversion of the notes.

This press release is being issued pursuant to Rule 135c under the Securities Act and shall not constitute an offer to sell nor a solicitation of an offer to buy any of these securities (including the shares of Akamai's common stock, if any, issuable upon conversion of the notes). Any offer of notes will be made only by means of a private offering memorandum. The notes and the common stock issuable upon conversion of the notes, if any, have not been and will not be registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. 

The release contains information about future expectations, plans and prospects of Akamai's management that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995, including statements with respect to Akamai's expectations to complete the proposed offering of the notes, its use of proceeds from the offering and the effect of the concurrent stock repurchase and the convertible note hedge and warrant transactions. There can be no assurance that Akamai will be able to complete the proposed notes offering on the anticipated terms, or at all. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including, but not limited to, the terms of the notes and the offering, risks and uncertainties related to whether or not Akamai will consummate the offering, the impact of general economic, industry, market or political conditions and other factors that are discussed in Akamai's Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other documents periodically filed with the SEC.

In addition, the statements in this press release represent Akamai's expectations and beliefs as of the date of this press release. Akamai anticipates that subsequent events and developments may cause these expectations and beliefs to change. However, while Akamai may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Akamai's expectations or beliefs as of any date subsequent to the date of this press release.

About Akamai

Akamai is the cybersecurity and cloud computing company that powers and protects business online. Our market-leading security solutions, superior threat intelligence, and global operations team provide defense-in-depth to safeguard enterprise data and applications everywhere. Akamai's full-stack cloud computing solutions deliver performance and affordability on the world's most distributed platform. Global enterprises trust Akamai to provide the industry-leading reliability, scale, and expertise they need to grow their business with confidence.

Contacts:
Christine Simeone
Media Relations
Akamai Technologies
AkamaiPR@akamai.com

Mark Stoutenberg
Investor Relations
Akamai Technologies
mstouten@akamai.com

View original content to download multimedia:https://www.prnewswire.com/news-releases/akamai-announces-proposed-offering-of-convertible-senior-notes-302454495.html

SOURCE Akamai Technologies, Inc.

FAQ

What is the size of Akamai's (AKAM) 2033 convertible notes offering?

Akamai is offering $1.35 billion in convertible senior notes due 2033, with an additional option for purchasers to buy up to $202.5 million more.

How will Akamai (AKAM) use the proceeds from its 2033 convertible notes?

Akamai will use the proceeds to repay $250M in credit facility borrowings, service existing $1.15B convertible notes due 2027, repurchase $275M in common stock, and fund convertible note hedge transactions.

When do Akamai's (AKAM) 2033 convertible notes mature?

The convertible notes will mature on May 15, 2033, unless earlier repurchased or converted according to their terms.

How much stock will Akamai (AKAM) repurchase with the convertible notes proceeds?

Akamai intends to use approximately $275 million of the proceeds to repurchase shares of its common stock from note purchasers in privately-negotiated transactions.

What are the interest payment terms for Akamai's (AKAM) 2033 convertible notes?

Interest will be payable semi-annually in arrears on May 15 and November 15 of each year, beginning November 15, 2025.