Zillow Group, Inc. (NASDAQ:Z) (NASDAQ:ZG) announced today the
pricing of concurrent underwritten public offerings of 5,701,754
shares of its Class C capital stock (the “Shares”) at a price to
the public of $57 per share and $325 million aggregate principal
amount of its 1.50% convertible senior notes due 2023 (the
“Notes”). Zillow Group also granted the underwriters of the Shares
offering (the “Shares Offering”) a 30-day option to purchase up to
an additional 855,263 Shares and the underwriters of the Notes
offering (the “Notes Offering”) a 30-day option to purchase up to
an additional $48.75 million aggregate principal amount of Notes.
The Shares Offering and the Notes Offering are both expected to
settle on July 3, 2018, in each case subject to customary closing
conditions.
Zillow Group expects that the net proceeds from the Shares
Offering will be approximately $313.3 million (or $360.3 million if
the underwriters exercise their option to purchase additional
Shares in full) and expects that the net proceeds from the Notes
Offering will be approximately $316.5 million (or $364.0 million if
the underwriters exercise their option to purchase additional Notes
in full), in each case after deducting underwriting discounts and
commissions and estimated offering expenses payable by Zillow
Group. Neither offering is contingent on the completion of the
other offering. Zillow Group intends to use approximately $25.6
million of the net proceeds from the Notes Offering to pay the cost
of the capped call transactions described below. Zillow Group
intends to use the remainder of the net proceeds from the Notes
Offering and the net proceeds from the Shares Offering for general
corporate purposes, which may include general and administrative
matters and capital expenditures. Additionally, Zillow Group may
choose to use a portion of the net proceeds to expand its current
business through acquisitions of, or investments in, other
businesses, products or technologies. However, Zillow Group has no
definitive agreements or commitments with respect to any such
acquisitions or investments at this time.
The Notes will be senior, unsecured obligations of Zillow Group,
and will mature on July 1, 2023, unless earlier repurchased,
redeemed or converted in accordance with their terms. The Notes
will bear interest at a fixed rate of 1.50% per year, payable
semi-annually in arrears on January 1 and July 1 of each year,
beginning on January 1, 2019.
Prior to the close of business on the business day immediately
preceding April 1, 2023, the Notes will be convertible at the
option of the holder of the Notes only under certain conditions. On
or after April 1, 2023, until the close of business on the second
scheduled trading day immediately preceding the relevant maturity
date, holders of Notes may convert their Notes at their option at
the conversion rate then in effect, irrespective of these
conditions. Zillow Group will settle conversions of the Notes by
paying or delivering, as the case may be, cash, shares of its Class
C capital stock, or a combination of cash and shares of its Class C
capital stock, at its election.
The conversion rate will initially be 12.7592 shares of Class C
capital stock per $1,000 principal amount of Notes (equivalent to
an initial conversion price of approximately $78.37 per share of
Class C capital stock). The conversion rate and the corresponding
conversion price will be subject to adjustment in some events but
will not be adjusted for any accrued and unpaid interest. Zillow
Group may redeem for cash all or part of the Notes, at its option,
on or after July 6, 2021, under certain circumstances at a
redemption price equal to 100% of the principal amount of the Notes
to be redeemed, plus accrued and unpaid interest to, but excluding,
the redemption date (as defined in the indenture governing the
Notes).
If Zillow Group undergoes a fundamental change (as defined in
the indenture governing the Notes), holders of Notes may require
Zillow Group to repurchase for cash all or part of their Notes at a
repurchase price equal to 100% of the principal amount of the Notes
to be purchased, plus accrued and unpaid interest to, but
excluding, the fundamental change repurchase date (as defined in
the indenture governing the Notes). In addition, if certain
fundamental changes occur, Zillow Group may be required in certain
circumstances to increase the conversion rate for any Notes
converted in connection with such fundamental changes by a
specified number of shares of its Class C capital stock.
In connection with the pricing of the Notes, Zillow Group has
entered into privately negotiated capped call transactions with the
underwriters of the Notes Offering or their respective affiliates
and other financial institutions (the “Option Counterparties”). The
capped call transactions are expected generally to reduce the
potential dilution to Zillow Group’s Class C capital stock upon any
conversion of Notes or offset the cash payments Zillow Group is
required to make in excess of the principal amount of the Notes in
the event that the market price of Zillow Group’s Class C capital
stock is greater than the strike price of the capped call
transactions (which initially corresponds to the initial conversion
price of the Notes and is subject to certain adjustments under the
terms of the capped call transactions), with such reduction or
offset subject to a cap based on the cap price of the capped call
transactions. The capped call transactions have an initial cap
price of approximately $78.37 per share, which represents a premium
of approximately 37.5% over the public offering price of Zillow
Group’s Class C capital stock in the concurrent Shares Offering of
$57, and is subject to certain adjustments under the terms of the
capped call transactions. The capped call transactions will cover,
subject to anti-dilution adjustments substantially similar to those
applicable to the Notes, the number of shares of Zillow Group’s
Class C capital stock that will underlie the Notes. If the
underwriters of the Notes Offering exercise their option to
purchase additional Notes, Zillow Group may enter into additional
capped call transactions with the Option Counterparties.
Zillow Group expects that, in connection with establishing their
initial hedges of the capped call transactions, the Option
Counterparties or their respective affiliates will enter into
various derivative transactions with respect to Zillow Group’s
Class C capital stock or purchase shares of Zillow Group’s Class C
capital 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 Zillow Group’s Class C capital
stock or the Notes at that time, and could result in a higher
effective conversion price for the Notes.
In addition, Zillow Group expects that the Option Counterparties
or their respective affiliates may modify their hedge positions by
entering into or unwinding various derivative transactions with
respect to Zillow Group’s Class C capital stock or by purchasing or
selling Zillow Group’s Class C capital stock or other securities of
Zillow Group 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 relating to a conversion of
the Notes or in connection with any repurchase of Notes by Zillow
Group). This activity could also cause or avoid an increase or a
decrease in the market price of Zillow Group’s Class C capital
stock or the Notes, which could affect the ability of holders of
Notes 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 number of shares and value of the consideration
that holders of Notes will receive upon conversion of the
Notes.
The capped call transactions have not been, and will not be,
registered under the Securities Act of 1933, as amended (the
“Securities Act”), or the securities laws of any other jurisdiction
and may not be offered or sold in the United States without
registration or an applicable exemption from registration
requirements.
Goldman Sachs & Co. LLC and Citigroup Global Markets Inc.
are acting as joint book-running managers for the Shares Offering
and the Notes Offering. Canaccord Genuity LLC, JMP Securities LLC
and Macquarie Capital (USA) Inc. are acting as co-managers for the
Shares Offering.
The Shares Offering and the Notes Offering are being made
pursuant to Zillow Group’s shelf registration statement (including
a base prospectus), a preliminary prospectus supplement related to
the Shares Offering (together with such base prospectus, the
“Shares Prospectus”) and a preliminary prospectus supplement
related to the Notes Offering (together with such base prospectus,
the “Notes Prospectus”), all of which Zillow Group filed with the
Securities and Exchange Commission (“SEC”) on June 27, 2018. Zillow
Group intends to file final prospectus supplements related to the
Shares Offering and the Notes Offering with the SEC. Before
investing in the Shares or the Notes, investors should read the
Shares Prospectus or the Notes Prospectus, as applicable, and in
each case including the documents incorporated by reference
therein, and any free writing prospectus related to the Shares
Offering or the Notes Offering, as the case may be. These documents
may be obtained for free by visiting EDGAR on the SEC’s website at
www.sec.gov. Alternatively, copies may be obtained from Goldman
Sachs & Co. LLC, Attention: Prospectus Department, 200 West
Street, New York, New York 10282 (telephone: (866) 471-2526 or
email: prospectus-ny@ny.email.gs.com), or Citigroup Global Markets
Inc., c/o Broadridge Financial Solutions, 1155 Long Island Avenue,
Edgewood, NY 11717 (telephone: (800) 831-9146).
This press release does not constitute an offer to sell or a
solicitation of an offer to buy any securities, nor shall it
constitute an offer, solicitation, or any sale in any jurisdiction
in which such offer, solicitation, or sale is unlawful. The
securities being offered have not been approved or disapproved by
any regulatory authority, nor has any such authority passed upon
the accuracy or adequacy of the registration statement, the
prospectus contained therein or the prospectus supplements.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act, and Section 21E
of the Securities Exchange Act of 1934, as amended, that involve
risks and uncertainties, including, without limitation, statements
regarding the Shares Offering and the Notes Offering and the
intended use of the net proceeds of these offerings. Statements
containing words such as “could,” “believe,” “expect,” “intend,”
“will,” or similar expressions constitute forward-looking
statements. Differences in Zillow Group’s actual results from those
described in these forward-looking statements may result from
actions taken by Zillow Group as well as from risks and
uncertainties beyond Zillow Group’s control. Factors that may
contribute to such differences include, but are not limited to,
risks related to whether Zillow Group will consummate the Shares
Offering, the Notes Offering and the capped call transactions,
market and other general economic conditions, whether Zillow Group
will be able to satisfy the conditions required to close any sale
of the Shares or the Notes or the capped call transactions and the
fact that Zillow Group’s management will have broad discretion in
the use of the proceeds from any sale of the Shares and the Notes.
The foregoing list of risks and uncertainties is illustrative, but
is not exhaustive. For information about other potential factors
that could affect Zillow Group’s business and financial results,
please review the “Risk Factors” described in Zillow Group’s
Quarterly Report on Form 10-Q for the quarterly period ended March
31, 2018 and its Annual Report on Form 10-K for the year ended
December 31, 2017, each filed with the SEC, and in Zillow Group’s
other filings with the SEC. Except as may be required by law,
Zillow Group does not intend, and undertakes no duty, to update
this information to reflect future events or circumstances.
(ZFIN)
Contacts: Raymond JonesInvestor
Relationsir@zillowgroup.com
Katie CurnuttePublic
Relations
press@zillow.com
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