Underwritten Public Offering
On September 10, 2024, Terns Pharmaceuticals, Inc. (the “Company”) entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC and TD Securities (USA) LLC, as representatives of the several underwriters named in Schedule 1 thereto (collectively, the “Underwriters”), relating to the underwritten public offering (the “Offering”) of 11,919,048 shares (the “Underwritten Shares”) of the Company’s common stock, $0.0001 par value per share (the “Common Stock”), and, in lieu of Common Stock to certain investors, pre-funded warrants (the “Pre-Funded Warrants”) to purchase 2,380,952 shares of Common Stock (the “Warrant Shares”). Under the terms of the Underwriting Agreement, the Company granted the Underwriters an option, exercisable within 30 days from the date of the Underwriting Agreement, to purchase up to 2,145,000 additional shares of Common Stock (the “Option Shares” and together with the Underwritten Shares, the “Shares”), which the Underwriters exercised in full on September 11, 2024. The closing of the Offering is expected to take place on September 12, 2024. All of the Shares and Pre-Funded Warrants are being sold by the Company. The offering price of the Shares to the public is $10.50 per share, and the offering price of the Pre-Funded Warrants to the public is $10.4999 per share underlying each Pre-Funded Warrant. The Underwriters have agreed to purchase the Shares from the Company pursuant to the Underwriting Agreement at a price of $9.87 per share and the Pre-Funded Warrants from the Company pursuant to the Underwriting Agreement at a price of $9.869906 per share underlying each Pre-Funded Warrant.
Each Pre-Funded Warrant has an exercise price per share of Common Stock equal to $0.0001 per share. The exercise price and the number of shares of Common Stock issuable upon exercise of each Pre-Funded Warrant is subject to appropriate adjustments in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the Common Stock. Each Pre-Funded Warrant is exercisable from the date of issuance by means of a cashless exercise. Under the Pre-Funded Warrants, the Company may not effect the exercise of any Pre-Funded Warrant, and a holder will not be entitled to exercise any portion of any Pre-Funded Warrant that, upon giving effect to such exercise, would cause: (i) the aggregate number of shares of Common Stock beneficially owned by such holder (together with its affiliates) to exceed 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise; or (ii) the combined voting power of the Company’s securities beneficially owned by such holder (together with its affiliates) to exceed 4.99% of the combined voting power of all of the Company’s securities outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Pre-Funded Warrant, which percentage may be changed at the holder’s election to a higher or lower percentage not in excess of 19.99% upon 61 days’ notice to the Company.
In addition, in certain circumstances, upon a fundamental transaction, a holder of Pre-Funded Warrants will be entitled to receive, upon exercise of the Pre-Funded Warrants, the kind and amount of securities, cash or other property that such holder would have received had they exercised the Pre-Funded Warrants immediately prior to the fundamental transaction; provided, however, that in the event of a fundamental transaction where the consideration consists solely of cash, solely of marketable securities or a combination thereof, each Pre-Funded Warrant will be deemed to be exercised in full in a cashless exercise effective immediately prior to and contingent upon the consummation of such fundamental transaction.
The foregoing is only a brief description of the terms of the form of Pre-Funded Warrant, does not purport to be a complete statement of the rights and obligations of the parties thereto and the transactions contemplated thereby, and is qualified in its entirety by reference to the form of Pre-Funded Warrant, which is filed as Exhibit 4.1 to this Current Report on Form 8-K and is incorporated herein by reference.
The Company estimates that the net proceeds from the Offering will be approximately $161.9 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, and including the full exercise of the Underwriters’ option to purchase the Option Shares.
The Offering was made pursuant to a shelf registration statement on Form S-3 (File No. 333-269508) that was filed with the Securities and Exchange Commission (“SEC”) on February 1, 2023 and declared effective by the SEC on February 10, 2023. A prospectus supplement relating to the offering has been filed with the SEC.
