PureCycle Technologies reported a combined debt and equity financing on Wednesday that could bring in up to $395 million, prompting a sharp move in its share price. The company's stock fell 13% in after-hours trading following the disclosure.
The offerings consist of an underwritten public sale of $250 million in convertible senior notes due 2032 and a concurrent common stock offering of $145 million. In addition, PureCycle granted the underwriters 30-day options to purchase extra securities to cover over-allotments - specifically up to $37.5 million in notes and up to $18.75 million in common stock.
The company said the new convertible notes will be unsecured general obligations of PureCycle and will accrue interest that will be paid semiannually. Key commercial terms for the notes - including the interest rate and conversion rate - will be set at the time of pricing.
PureCycle outlined its intended use of proceeds from the transactions. The company expects to apply net proceeds to repurchase a portion of its outstanding 7.25% green convertible notes due 2030 via privately negotiated transactions. It also said additional proceeds, as available, would be used to repurchase more of the green convertible notes from time to time. Any remaining funds are planned for working capital and general corporate purposes.
Morgan Stanley is acting as the sole bookrunner for both the convertible note and equity offerings.
This financing announcement and the related move in the stock price directly touch capital markets and investor sentiment around PureCycle's balance-sheet management. The company is replacing or repurchasing higher-coupon convertible debt while raising new capital that will carry different terms yet to be determined at pricing.
The company did not provide further details in the announcement about timing for the negotiated repurchases, the precise pricing of the new notes or stock, or how much of the outstanding 7.25% green convertible notes it expects to repurchase in the initial transactions.