Item 1.01. Entry into a Material Definitive Agreement.
Issuance of Additional Notes
On November 14, 2018, Wayfair Inc. (the “Company”) entered into a purchase agreement (the “Purchase Agreement”) with certain financial institutions (collectively, the “Initial Purchasers”) pursuant to which the Company agreed to sell $500,000,000 aggregate principal amount of its 1.125% Convertible Senior Notes due 2024 (the “Original Notes”) and also granted a13-day option (the “Option”) to the Initial Purchasers to purchase all or part of an additional $75,000,000 aggregate principal amount of its 1.125% Convertible Senior Notes due 2024 (the “Additional Notes” and together with the Original Notes, the “Notes”).
On November 29, 2018, the Company issued all $75,000,000 of Additional Notes to the Initial Purchasers pursuant to the Initial Purchasers’ exercise in full of the Option. The Additional Notes were issued under the indenture (the “Indenture”), dated as of November 19, 2018, between the Company and U.S. Bank National Association, as trustee, and have identical terms to the Original Notes. The Indenture and the Notes are each as described in Item 1.01 of the Company’s Current Report onForm 8-K (the“Prior 8-K”) filed with the Securities and Exchange Commission on November 19, 2018, which is incorporated herein by reference.
The foregoing description is qualified in its entirety by reference to the text of the Indenture and the Form of 1.125% Convertible Senior Notes due 2024, which are filed as Exhibit 4.1 and 4.2, respectively, to thePrior 8-K and are incorporated herein by reference.
Additional Capped Call Transactions
On November 27, 2018, in connection with the Initial Purchasers’ exercise in full of the Option, the Company entered into additional privately negotiated capped call transactions (the “Additional Capped Call Transactions”) with one of the Initial Purchasers and certain other financial institutions (the “Option Counterparties”). Collectively, the Additional Capped Call Transactions cover, initially, the number of shares of the Company’s Class A common stock underlying the Additional Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Notes. The cost of the Additional Capped Call Transactions was approximately $12.2 million.
The Additional Capped Call Transactions are on the same terms as the capped call transactions that the Company entered into with the Option Counterparties in connection with the pricing of the Original Notes.
The Additional Capped Call Transactions are expected generally to reduce the potential dilution and/or offset the cash payments the Company is required to make in excess of the principal amount of the Additional Notes upon conversion of the Additional Notes in the event that the market price per share of the Company’s Class A common stock is greater than the strike price of the Additional Capped Call Transactions (which initially corresponds to the initial conversion price of the Notes and is subject to certain adjustments under the terms of the Additional Capped Call Transactions), with such reduction and/or offset subject to a cap based on the cap price of the Additional Capped Call Transactions. The cap price of the Additional Capped Call Transactions will initially be $219.6250 per share of the Company’s Class A common stock, which represents a premium of 150% over the last reported sale price of the Company’s Class A common stock on November 14, 2018, and is subject to certain adjustments under the terms of the Additional Capped Call Transactions. The options underlying the Additional Capped Call Transactions can, at the Company’s option, remain outstanding until November 1, 2024, which is the maturity date for the Notes, even if all or a portion of the Notes are converted, repurchased or redeemed prior to such date.
The Additional Capped Call Transactions are separate transactions, in each case, entered into by the Company with the Option Counterparties, and are not part of the terms of the Notes and will not affect any holder’s rights under the Notes. Holders of the Notes will not have any rights with respect to the Additional Capped Call Transactions.
The foregoing description is qualified in its entirety by reference to the text of the letter agreements in respect of the Additional Capped Call Transactions, which are attached as Exhibits 10.1, 10.2 and 10.3 to this Current Report on Form8-K and are incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under anOff-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 of this Current Report on Form8-K under the heading “Issuance of Additional Notes” is incorporated herein by reference.
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