Unity Offers $1.5B Convertible Senior Notes


Video game software development company Unity Software Inc. (U) has revealed its plans to offer a $1.5 billion aggregate principal amount of convertible senior notes due 2026, in a private placement, to qualified institutional buyers.

The initial purchasers have an option to purchase the notes within a 13-day period beginning on, and including, the date on which the notes are first issued, up to an additional $225 million aggregate principal amount of notes. (See Unity stock chart on TipRanks)

Upon conversion, the company expects to pay or deliver in cash, shares of Unity’s common stock or a combination of cash and shares of Unity’s common stock.

The net proceeds from the offering are expected to be used to pay the cost of the capped call transactions, general corporate purposes and for acquisitions or strategic investments in complementary businesses or technologies. With the proceeds from additional notes purchased, Unity plans to enter into additional capped call transactions with the Option Counterparties.

Capped call transactions are to be entered with one or more of the initial purchasers or affiliates thereof and other financial institutions. These transactions are aimed to reduce the potential dilution to Unity’s common stock upon any conversion of notes and offset any cash payments the company makes in excess of the principal amount of converted notes.

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Analysts Recommendation

Last week, Wedbush analyst Michael Pachter maintained a Buy rating on Unity with a price target of $175 (11.4% downside potential).

Patcher said, “We think that advertisers will continue to turn to Unity for its contextual targeting expertise and vast access to user data. The road to 3D content creation is only just beginning, marked by the increasing popularity of metaverses within gaming, and reflected by the company’s growing list of non-gaming customers.”

Based on 7 Buys and 3 Holds, the stock has a Moderate Buy consensus rating. The average Unity price target of $168.63 implies 14.6% downside potential from current levels.

Smart Score

Unity scores an 8 out of 10 on TipRanks’ Smart Score rating system, suggesting that the stock is likely to outperform market averages.

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