Robinhood raises $2 billion via convertible notes, plans $300 million buyback

Robinhood Markets Inc. plans to offer $2 billion in convertible senior notes due 2029, with about $300 million of the proceeds earmarked to repurchase its Class A common stock, the company said Monday.

"This opportunistic capital raise enhances our strategic flexibility to invest for future growth," the company said in a statement, adding that a portion of the proceeds will fund capped call transactions designed to offset dilution up to a targeted 125% premium to the last reported sale price on the pricing date.

The notes, offered in a private placement to qualified institutional buyers under Rule 144A, mature Oct. 1, 2029. Robinhood granted initial purchasers an option to buy an additional $200 million in notes. The company will settle conversions in cash up to the principal amount, with any excess payable in cash, shares or a combination at its election. The interest rate and initial conversion rate will be determined at pricing.

Robinhood may not redeem the notes before July 1, 2028, except in a cleanup redemption if less than $100 million remains outstanding. After that date, it may redeem all or part of the notes if its stock trades at least 120% of the conversion price for 20 trading days in any 30-day period. The remainder of the net proceeds will go toward general corporate purposes, including organic growth investments, potential acquisitions and capital expenditures. The company plans to continue repurchasing shares under its existing stock repurchase program following the offering.

The capped call transactions, entered into with the initial purchasers or their affiliates, cover the number of shares initially underlying the notes. The option counterparties are expected to purchase Robinhood shares or enter derivative transactions to establish initial hedges, which could affect the stock price around pricing. They may also modify hedge positions through the notes' maturity, including during conversion observation periods or after fundamental changes.

The offering signals management's confidence in deploying capital for growth while returning cash to shareholders. Investors will watch the pricing terms, including the conversion premium and interest rate, for signals on institutional demand.

This article is for informational purposes only and does not constitute investment advice.