JWCA advises Datadog on its upsized $1 billion zero-coupon convertible and capped call transaction

december 2024 | read press release

Transaction Background

Datadog, Inc. (“Datadog” or the “Company”) successfully raised an upsized $1bn (inclusive of greenshoe) in the convertible market at highly attractive terms (0.00% coupon and 35.0% conversion premium)

Datadog’s objectives included:

  • Opportunistically repurchase a portion of its 2025 convertible notes to manage outstanding liabilities and capital structure

  • Protect against future equity dilution through a derivative overlay

  • Minimize stock price risk during execution after reaching a 52-week high in the week leading up to execution

JWCA provided extensive analysis on deal structuring and related items, including:

  • Refinancing tactics and analysis

  • Convertible and derivative overlay structuring

  • Convertible and capped call documentation to ensure maximum value and future efficiency/flexibility for the Company

  • Accounting and tax analysis/implications

  • Syndicate structure and precedent data

  • Execution timing

  • Shareholder messaging

JWCA designed and ran a capped call auction process to achieve competitive terms

JWCA provided advice, support and analysis throughout the execution process

Results   

Datadog's convertible transaction was very well received by investors:

  • The transaction was multiple times oversubscribed, reflecting strong investor interest and demand in the Company’s convertible bond offering, leading to the issue being upsized by $95mm (~12% of original $775mm base deal)

  • The 0.00% coupon represented the low end of the marketed coupon range

  • The 35.0% conversion premium was above the high end of the marketed conversion premium range

Datadog retired $112mm of outstanding 2025 convertible notes at a minimal premium to parity

Capped call documentation and auction process produced meaningful savings for Datadog, driving economics in the Company's favor

This is JWCA’s second advisory assignment for the Company after advising Datadog on its inaugural convertible issuance in May 2020