SAN MATEO, Calif. - Upstart (NASDAQ:UPST) Holdings, Inc. (NASDAQ: UPST), a lending platform powered by artificial intelligence, has announced its intention to offer $300 million in Convertible Senior Notes due in 2029. The private offering is targeted at qualified institutional buyers, with an additional option for purchasers to buy up to $45 million more in aggregate principal amount of the notes within a 13-day period starting from the issuance date.
The notes, set to mature on October 1, 2029, will be senior, unsecured obligations of the company, bearing interest paid semi-annually. They will be convertible into cash, shares of Upstart's common stock, or a combination of both, at the company's discretion. The specific terms, including the interest rate and initial conversion rate, will be determined at the time of the offering's pricing.
Upstart intends to allocate a portion of the net proceeds to finance capped call transactions, which are meant to reduce the potential dilution from the conversion of the notes or to minimize any cash payments above the principal amount upon conversion. The remainder of the proceeds is earmarked for repurchasing part of Upstart's outstanding 0.25% Convertible Senior Notes due in 2026 and for general corporate purposes.
In line with the offering, Upstart plans to enter into capped call transactions with some initial purchasers or their affiliates and/or other financial institutions. These transactions are designed to offset potential dilution to Upstart's common stock upon conversion of the notes. If the initial purchasers exercise their option to buy additional notes, Upstart will use part of those proceeds to enter into further capped call transactions.
Market activities by the option counterparties, such as purchasing Upstart's common stock or entering derivative transactions, may affect the stock's market price concurrently with or shortly after the pricing of the notes. These activities could also influence the trading price of the notes and the effective conversion price.
The offering is made exclusively to qualified institutional buyers according to Rule 144A under the Securities Act by way of a private offering memorandum. Neither the notes nor the Upstart common stock potentially issuable upon conversion have been registered under the Securities Act or any state securities laws. As such, they may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements.
This press release serves as a factual statement of Upstart's intentions and does not constitute an offer to sell or a solicitation of an offer to buy the securities mentioned. The information is based on a press release statement from Upstart Holdings, Inc.
In other recent news, Upstart Holdings Inc . has been the subject of several notable developments. The company reported second-quarter results that exceeded expectations, leading to a positive outlook for the future. This performance prompted BofA Securities to increase its price target for Upstart from $23 to $27, while maintaining an underperform rating on the stock. Upstart's loan volume and revenue growth are showing signs of acceleration, a trend expected to continue as the macroeconomic environment improves.
Simultaneously, Upstart has entered a partnership with AMOCO Federal Credit Union to offer AI-driven loans, expanding its reach and enhancing its lending capabilities. This collaboration integrates AMOCO into the Upstart Referral Network, offering potential borrowers personalized loan offers.
Furthermore, the company's financial outcomes for Q2 2024 indicate a move toward sequential growth and EBITDA profitability. Despite a 9% year-over-year decline in fee revenue to $131 million, Upstart saw a 31% increase in loan transaction volume. The company anticipates total revenues of approximately $150 million for Q3 2024, and projects positive adjusted EBITDA in Q4 2024. These developments underscore Upstart's ongoing efforts to refine its AI-driven lending platform and its strategic move towards a more sustainable and diversified funding structure.
InvestingPro Insights
As Upstart Holdings, Inc. (NASDAQ: UPST) navigates the financial markets with its latest strategic move to offer Convertible Senior Notes, insights from InvestingPro paint a nuanced picture of the company's current standing. With a market capitalization of $3.4 billion, Upstart's financial health and stock performance metrics offer a window into its investment profile.
InvestingPro data highlights the company's high Price / Book ratio of 5.72 as of the last twelve months leading up to Q2 2024, suggesting a premium valuation compared to its book value. This could be reflective of the market's expectations for future growth or the unique value proposition of Upstart's AI-driven lending platform. Despite a modest revenue growth of 2.52% during the same period, the company faces challenges with profitability, as indicated by a negative P/E ratio of -16.04. Furthermore, the company's significant gross profit margin of 73.76% demonstrates its ability to retain a substantial portion of revenue after accounting for the cost of goods sold, although it's currently not translating into operating profits.
InvestingPro Tips reveal that Upstart has experienced a significant return over the last week and a strong return over the last three months, with price total returns of 8.07% and 69.85% respectively. This volatile stock price movement is a characteristic that traders might find appealing, yet it also indicates a higher risk profile which should be considered by potential investors. Notably, analysts do not anticipate the company to be profitable this year, a critical factor for investors to consider in light of the recent financing activities.
For those looking for more in-depth analysis, there are additional InvestingPro Tips available on the platform, which can provide further guidance on Upstart's financial health and investment potential. These tips delve into aspects such as liquidity, profitability, and stock price trends, offering a comprehensive toolkit for making informed investment decisions.
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