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Coupa (COUP) Closes Senior Note Offering Worth $200 Million

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Coupa Software Inc.  concluded the earlier announced offering of $230 million of convertible unsecured senior notes to enhance liquidity. The unsecured, senior notes would pay interest at a rate of 0.35% semi-annually per annum. The notes are slated to mature on Jan 15, 2023, unless repurchased, redeemed or converted in accordance with their terms prior to such date.

The notes were offered to qualified institutional buyers only and in accordance with Rule 144A under the Securities Act of 1933, as amended. The gross proceeds of $230 million include an option of additional $30 million aggregate principal amount given to the initial purchasers.

The conversion rate for the notes will remain at 22.4685 shares per $1,000 principal amount of notes initially, and subject to adjustments in certain cases. The initial conversion price represents a premium of approximately 32.5% to the closing price of Coupa’s commonstock on Jan 11, 2018, which was $33.59 per share.

The company’s estimates state that the net proceeds from this offering of notes will be approximately $223 million, after the initial purchasers optimally exercise their option and deducted discounts, commissions and estimated offering expenses.

It used nearly $23.3 million of the net proceeds to pay the cost of the capped call transactions. It also intends to use the remaining of the net proceeds for the general corporate purposes, strategic acquisitions and working capital.

Upon conversion, the notes are most likely to be settled in cash, shares of Coupa’s common stock or combination of the two. The notes will be redeemable, at the company’s option at any time on or after Jan 20, 2021 at a price equal to the principal amount of the notes to be redeemed, added with the accrued and unpaid interest. This choice of redemption will apply only if the last reported sale price per share of Coupa’s common stock exceeds 130% of the conversion price on each of at least 20 trading days.

Notably, the stock has returned 42.2% in a year, slightly better than the 25.9% rally of its industry.

We believe that the company has a strong balance sheet, which will help it in capitalizing on investment opportunities and pursuing strategic acquisitions, further improving growth prospects. Moreover, the senior notes offering will lower the company’s cost of capital, consequently strengthening balance sheet and supporting growth.

Zacks Rank & Key Picks

Coupa carries a Zacks Rank #3 (Hold).

Analog Devices, Inc. (ADI - Free Report) , Micron Technology, Inc. (MU - Free Report) and Mellanox Technologies, Ltd. are better-ranked stocks which sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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