Backblaze Debt Financing
Backblaze Announces Pricing of Upsized $175 Million Convertible Senior Notes Offering
Backblaze, a cloud storage company serving AI workloads, announced on August 20 the pricing of a $175 million convertible debt offering. The company upsized the deal from an originally planned $150 million after strong investor demand Financial Post. The zero-interest notes mature in 2031 and will raise approximately $167.2 million in net proceeds, or $192.7 million if an over-allotment option is fully exercised.
Stock Falls Then Rebounds on Debt Announcement
Backblaze stock dropped 8.33% to $17.60 in after-hours trading on August 18 when the company first announced plans for the $150 million offering Leader-Post. Investors worried about new debt and potential stock dilution. The stock continued declining, closing at $16.88 on August 19. However, strong institutional buying quickly reversed sentiment, allowing the company to boost the offering size by 16.6% to $175 million.
Zero Interest Rate Locks in Cheap Capital
The 0.00% interest rate on the convertible notes is a significant win for Backblaze in today's economic environment Toronto Sun. The company will not pay regular interest, and the principal amount will not grow over time. Investors convert the debt to stock at a price of $21.94 per share—a 30% premium over the August 19 close of $16.88. The notes mature on August 15, 2031, unless earlier converted or redeemed.
Capped Calls Protect Against Shareholder Dilution
Backblaze will spend approximately $15.2 million of the proceeds on capped call transactions to hedge dilution risk Sault Star. These transactions set a cap price of $33.76 per share—a 100% premium over the August 19 closing price. When investors eventually convert notes to stock, the capped calls limit the number of new shares issued. This protects existing shareholders from excessive dilution while allowing debt investors upside on the conversion feature.
$152 Million Funds AI Infrastructure Expansion
After setting aside $15.2 million for capped calls, Backblaze has $152 million left for general corporate purposes and capital expenditures Mitchell Advocate. The company plans to aggressively expand its physical storage infrastructure to support AI and data-intensive enterprise workloads. On the same day, Backblaze also amended its credit facility with Citizens Bank. The amendment expands the revolving credit line from $20 million to $50 million and extends the maturity date to April 30, 2030.
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