Cloudflare 8-K

Summary

Convertible note financing. Cloudflare issued $2.50B of 0% convertible senior notes due 2031, including the initial purchasers’ fully exercised $325M option. The financing provides net proceeds for general corporate purposes after funding capped calls intended to offset potential dilution or reduce certain cash payments; that protection is capped.

Key Figures

• Notes: $2.50B aggregate principal amount; senior unsecured, 0% interest with no principal accretion, due 8/15/2031. Net proceeds were $2.46B after discounts, commissions and estimated offering expenses.
• Conversion: initially 2.0123 Class A shares per $1,000 principal, equivalent to $496.94 per share—a 60% premium to the $310.59 share price on 8/10/2026. Before 5/15/2031, conversion is permitted only under specified conditions; from that date, holders may convert at any time until shortly before maturity. Cloudflare may settle conversions in cash, shares or a combination.
• Capped calls: $259.5M cost; initial cap price $854.12 per share, a 175% premium to the 8/10/2026 share price. They generally offset conversion dilution or reduce cash payments above principal, but not beyond the cap.
• Credit agreement amendment: capped at $2.0B the unrestricted cash, cash equivalents and available-for-sale securities deducted from consolidated funded indebtedness when calculating the net leverage ratio for certain purposes.
• Remaining proceeds are intended for general corporate purposes, including working capital, capital expenditures, debt repayment, acquisitions and strategic transactions.

Investor Takeaways

• The conversion price and capped-call ceiling frame potential dilution: above the $854.12 cap, the capped calls no longer offset additional dilution or reduce the corresponding potential cash payments.