Backblaze proposes $150 million convertible note offering to fund AI storage capex
Object storage infrastructure has become a front-line capex decision across the sector as AI workloads drive data volumes higher. Against that backdrop, Backblaze, Inc. (Nasdaq: BLZE) announced a proposed private offering of $150…
Key takeaways
- Backblaze, Inc. (Nasdaq: BLZE) announced a proposed private offering of $150 million in Convertible Senior Notes due 2031 to qualified institutional buyers under Rule 144A.
- The company intends to use part of the proceeds for capital expenditures, with the remainder for general corporate purposes, per an 8-K filing.
- BofA Securities is acting as lead bookrunner, and the notes are senior, unsecured obligations convertible into cash, Class A common stock, or a combination at Backblaze's election.
- Backblaze expects to grant initial purchasers a 13-day option to buy up to an additional $22.5 million in notes to cover over-allotments.
- Both the interest rate and initial conversion rate will be set at pricing, and a portion of the net proceeds will fund capped call transactions to reduce dilution to Class A stockholders.
Object storage infrastructure has become a front-line capex decision across the sector as AI workloads drive data volumes higher. Against that backdrop, Backblaze, Inc. (Nasdaq: BLZE) announced a proposed private offering of $150 million aggregate principal amount of Convertible Senior Notes due 2031, targeting qualified institutional buyers in a Rule 144A private placement. The company intends to use a portion of the proceeds for capital expenditures and the remainder for general corporate purposes, according to an 8-K filing.
BofA Securities is acting as lead bookrunner. The notes will be senior, unsecured obligations, convertible into cash, Class A common stock, or a combination of both, at Backblaze's election. Both the interest rate and the initial conversion rate are to be determined at pricing, leaving the actual cost of this capital open for now. Backblaze also expects to grant the initial purchasers a 13-day option to acquire up to an additional $22.5 million in notes, solely to cover over-allotments.
Capped calls and dilution mechanics
A portion of the net proceeds goes toward capped call transactions, instruments designed to reduce potential dilution to Class A stockholders and to offset any cash payments Backblaze would otherwise be required to make above principal on conversion, subject to a cap. The Option Counterparties are expected to purchase Class A shares and enter into derivative positions around the time of note pricing as part of establishing initial hedges. That activity, the company noted, could push the share price or note prices in either direction. Subsequent modifications to those hedge positions, including secondary market purchases or sales of Class A shares, could do the same through the notes' 2031 maturity.
Backblaze describes itself as the object storage layer for AI infrastructure and data-intensive workloads, a platform built over two decades. The company reports more than 500,000 customers and a cross-border reach spanning 175 countries and hundreds of millions of end users. When a company with that footprint goes to the convertible market at this scale, with capex listed as a stated destination for the proceeds, the physical story is that storage capacity needs to be built. The warehouses are the tell.
The macro read-through runs to the rate environment. The notes' interest rate and initial conversion rate will not be set until pricing, and that number determines what this capital actually costs.
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