Shares of Stem, Inc. (NYSE: STEM) plunges over 1.61% early trading session on Thursday as the opposed to the previously announced $175 million offering, Stem, Inc. announced the pricing of $200 million aggregate principal amount of 4.25% Green Convertible Senior Notes due 2030 in a private offering to persons regarded as qualified institutional buyers in accordance with Rule 144A of the Securities Act of 1933, as amended.
In connection with the Offering, Stem has provided the initial holders of the Notes with an option to purchase up to an additional $40 million in aggregate principal amount of the Notes on the same terms and conditions for settlement within a 13-day window beginning on the date the Notes are first issued. Subject to the usual closing requirements, the sale of the Notes to the initial buyers is anticipated to close on April 3, 2023.
The Notes will constitute senior unsecured liabilities of Stem whenever they are issued. The Notes will maturity on April 1, 2030, unless acquired, redeemed, or converted in accordance with their conditions before then. Interest will accrue on them and be due in arrears every half-year. The Notes will be convertible based on an initial conversion rate of 140.3066 shares of Stem common stock for every $1,000 in principal amount of the Notes (equivalent to an initial conversion price of roughly $7.13 per share of common stock, representing a conversion premium of roughly 27.50% over Stem’s common stock’s most recent reported sale price on the NYSE on March 29, 2023).
Upon fulfillment of certain requirements, the Notes will be convertible into cash, shares of Stem common stock, or a combination of the two, with Stem having the option to choose the form of payment. On or after April 5, 2027 and before the 45th scheduled trading day immediately before the maturity date, Stem will have the option to redeem the Notes, in whole or in part, for cash, but only if the last reported sale price per share of Stem’s common stock exceeds 130% of the conversion price for a predetermined period of time.
Stem plans to use a sum of money equal to the net proceeds of the offering to finance or refinance existing, new, or ongoing Qualified Green Expenditures whole or in part. “Eligible Green Expenditures” may cover expenditures for initiatives that are in line with the Eligible Green Expenditures, such as research, development, acquisitions, capital expenditures, and operational costs. These investments may be made to build a more reliable clean energy system, optimize software capabilities for energy systems, and reduce waste through operations.
Stem anticipates that certain buyers of the Notes may try to build hedge positions with regard to the Notes by selling shares of Stem’s common stock or by engaging in a variety of derivative transactions. Additionally, holders of the 2028 Notes that are repurchased in the above-mentioned concurrent repurchases may unwind or enter into different derivative transactions involving Stem’s common stock and/or buy shares of Stem’s common stock on the open market in order to unwind any possible hedge positions they may have with regard to the 2028 Notes.
