Nutanix Inc. (NASDAQ:NTNX) is looking to offer $400 million aggregate principal amount of convertible senior notes in a private placement. The notes are slated to mature in 2023. The notes will be offered to institutional buyers qualifying under Rule 144A of the Securities Act of 1933, as amended. The offering is subject to certain market conditions.
Notably, the company is looking to grant preliminary buyers the privilege of buying another $60 million aggregate principal amount of senior notes within a period of 13 days (from and including) of the date of first issuance of the notes.
These notes, once placed, will be an unsecured senior liability of Nutanix, interest for which will be paid in arrears semi-annually. The notes can be converted to into cash and shares of Nutanix’s Class A common stock or a combination of cash and common shares of Nutanix at the discretion of the owners of the notes and the company.
The terms related to interest rate and initial conversion rate will be determined following the pricing of the offer. Nutanix intends to use the net proceeds from the planned offering to pay for its convertible note hedge transactions and other general corporate purposes.
Borrowing costs continue to be low, enabling companies to obtain easy financing. With the U.S. treasuries offering low rates, corporate bonds and borrowings from banks are now witnessing elevated demand. We believe these notes will provide financial flexibility to the company and propel long-term growth.
Nonetheless, escalating interest expenses due to increased debt burden may dampen the company’s profitability. It should be noted that at the end of first-quarter 2018, Nutanix had cash and short-term investments of $365.9 million.
Share Price Movement
Nutanix stock has gained 58.3% in the past six months, substantially outperforming the 20.7% rally of the industry it belongs to.
Zacks Rank and Key Picks
Nutanix has a Zacks Rank #2 (Buy).
Other top-ranked stocks in the same sector include Broadcom (NASDAQ:AVGO) , Analog Devices, Inc. (NASDAQ:ADI) and Mellanox Technologies, Ltd. (NASDAQ:MLNX) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Broadcom, Analog Devices and Mellanox Technologies is currently pegged at 13.8%, 10.4% and 16%, respectively.
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Nutanix Inc. (NTNX): Free Stock Analysis Report
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