| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
On March 15, 2021, Magnite, Inc., a Delaware corporation (the “Company”), and certain of its subsidiaries acting as guarantors (the “Guarantors”) offered and agreed to issue and sell $350 million aggregate principal amount of its 0.25% Convertible Senior Notes due 2026 (the “Initial Notes”) to certain initial purchasers (the “Initial Purchasers”). In addition, the Company granted the Initial Purchasers in the offering a 13-day option to purchase up to an additional $50 million aggregate principal amount of Notes on the same terms and conditions (the “Optional Notes,” and, together with the Initial Notes, the “Notes”), which was exercised in full on March 16, 2021.
The Company offered and sold the Notes to the Initial Purchasers in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and for resale by the Initial Purchasers to persons reasonably believed to be qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A under the Securities Act. The Company relied on these exemptions from registration based in part on representations made by the Initial Purchasers in the Purchase Agreement. The shares of the Company’s common stock, par value $0.00001 per share (the “Common Stock”), issuable upon conversion of the Notes, if any, have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
To the extent that any shares of Common Stock are issued upon conversion of the Notes, they will be issued in transactions anticipated to be exempt from registration under the Securities Act by virtue of Section 3(a)(9) thereof because no commission or other remuneration is expected to be paid in connection with conversion of the Notes and any resulting issuance of shares of Common Stock.
Convertible Notes and the Indenture
The Company issued the Notes pursuant to an Indenture, dated March 18, 2021 (the “Indenture”), among the Company, the Guarantors and The Bank of New York Mellon Trust Company, N.A., as trustee. The Notes are senior unsecured obligations of the Company and the Guarantors. The Indenture includes customary covenants and sets forth certain events of default after which the Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Company after which the Notes become automatically due and payable.
The Notes will mature on March 15, 2026, unless earlier redeemed, repurchased or converted. The Notes will bear interest from March 18, 2021 at a rate of 0.25% per year payable semiannually in arrears on March 15 and September 15 of each year, beginning on September 15, 2021.
The Notes will be convertible at the option of the noteholders only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021, if the last reported sale price per share of the Company’s Common Stock exceeds 130% of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any ten consecutive trading day period (such ten consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s Common Stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on the Company’s Common Stock; (4) if the Company calls such Notes for redemption; and (5) at any time from, and including, September 15, 2025 until the close of business on the second scheduled trading day immediately before the maturity date.
Upon conversion, the Company may satisfy its conversion obligation by paying and/or delivering, as the case may be, cash, shares of Common Stock or a combination of cash and shares of Common Stock, at the Company’s election, in the manner and subject to the terms and conditions provided in the Indenture. The conversion rate for the Notes will initially be 15.6539 shares of Common Stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $63.88 per share of Common Stock. The initial conversion price of the Notes represents a premium of 40% to the $45.63 per share closing price of the Company’s Common Stock on The Nasdaq Global Select Market on March 15, 2021. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture.
