Splunk Announces Proposed Private Placement of $1.7 Billion of Convertible Senior Notes

Date:2018-09-17

SAN FRANCISCO, September 17, 2018 - Splunk Inc. (NASDAQ: SPLK) today announced that it intends to offer, subject to market conditions and other factors, $850 million principal amount of Convertible Senior Notes due 2023 (the “2023 notes”) and $850 million principal amount of Convertible Senior Notes due 2025 (the “2025 notes,” and together with the 2023 notes, the “notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). Splunk also intends to grant the initial purchasers of the notes an option to purchase up to an additional $127.5 million principal amount of 2023 notes and up to an additional $127.5 million principal amount of 2025 notes.


The notes will be senior unsecured obligations of Splunk and will accrue interest payable semiannually in arrears. The notes will be convertible into cash, shares of Splunk’s common stock or a combination of cash and shares of Splunk’s common stock, at Splunk’s election. The interest rate, initial conversion rate, repurchase or redemption rights and other terms of the notes will be determined at the time of pricing of the offering.


Splunk intends to use a portion of the net proceeds from the offering to pay the cost of the capped call transactions described below. Splunk intends to use the remainder of the net proceeds for working capital and other general corporate purposes. Splunk may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses that complement its business, although it has no commitments to enter into any such acquisitions or investments at this time. If the initial purchasers exercise their option to purchase additional notes, Splunk expects to use a portion of the net proceeds from the sale of the additional notes to enter into additional capped call transactions as described below. Splunk intends to use the remainder of the net proceeds from the sale of the additional notes for working capital and other general corporate purposes.


In connection with the pricing of the notes, Splunk expects to enter into capped call transactions relating to each series of notes with one or more of the initial purchasers or their respective affiliates and/or other financial institutions (the “option counterparties”). The capped call transactions relating to the 2023 notes are expected generally to offset the potential dilution to Splunk’s common stock upon any conversion of the 2023 notes and/or offset any cash payments Splunk is required to make in excess of the principal amount of converted 2023 notes, as the case may be, with such offset subject to a cap based on a cap price.  The capped call transactions relating to the 2025 notes are expected generally to offset the potential dilution to Splunk’s common stock upon any conversion of 2025 notes and/or offset any cash payments Splunk is required to make in excess of the principal amount of converted 2025 notes, as the case may be, with such offset subject to a cap based on a cap price.  If, however, the market price per share of Splunk’s common stock, as measured under the terms of the capped call transactions, exceeds the relevant cap price of the capped call transactions, there would nevertheless be dilution and/or there would not be an offset of such potential cash payments, in each case, to the extent that such market price exceeds such cap price.  In addition, to the extent any observation period for any converted notes does not correspond to the period during which the market price of Splunk’s common stock is measured under the terms of the related capped call transactions, there could also be dilution and/or a reduced offset of any such cash payments as a result of the different measurement periods.  If the initial purchasers exercise their option to purchase additional notes, Splunk expects to enter into additional capped call transactions with the option counterparties with respect to the relevant series of notes as to which the option was exercised.


In connection with establishing their initial hedges of the capped call transactions, the option counterparties or their respective affiliates may purchase shares of Splunk’s common stock and/or enter into various derivative transactions with respect to Splunk’s common stock concurrently with or shortly after the pricing of the notes, including with certain investors in the notes. This activity could increase (or reduce the size of any decrease in) the market price of Splunk’s common stock or the notes at that time.


In addition, Splunk expects that the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to Splunk’s common stock and/or purchasing or selling Splunk’s common stock or other securities of Splunk in secondary market transactions following the pricing of the notes and prior to the maturity of each


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