Splunk shares were up almost 11% in recent trading.
Dreamstime
Splunk shares are trading sharply higher after the IT infrastructure analytics company announced an agreement to sell $1 billion of convertible senior notes to the private-equity firm Silver Lake “to support the continued transformation of its business.”
Splunk shares (ticker: SPLK) were up 10.8%, at $139.04, in recent trading.
Splunk has been working through a major business transformation, gradually shifting to cloud-based versions of its software, while also moving to a subscription-based revenue model.
The notes have an initial conversion price of $160, which is a 30% premium to the 10-day average closing price of the stock through June 21. The notes mature in July 2026 and bear interest at 0.75% a year.
Splunk also announced a new $1 billion stock-repurchase program.
In connection with the investment, Silver Lake Chairman Kenneth Hao will join the Splunk board, increasing the number of directors to 11 from 10.
Splunk CEO Doug Merritt said in a statement that the announcement “reaffirms the strength of our business fundamentals, cloud strategy and high-growth trajectory.” He adds that with Silver Lake’s support, the company is “accelerating toward our goals as we deliver the most scalable and powerful data platform in the cloud.”
Earlier this month, Splunk reported revenue for its first quarter ended April 30 of $502 million, up 16% from a year earlier and ahead of the company’s guidance range of $480 million to $500 million. Splunk said its cloud-based annual recurring revenue was $877 million, up 83%, while total annual recurring revenue was $2.47 billion, up 39%.
In a statement, Hao said that Silver Lake has “long admired Splunk’s world-class team and technology” and that “the company is now at an important inflection point.”
Added Hao: “It has become increasingly clear that a cloud-driven transformation is critical to modernization and Splunk is ideally positioned to help organizations throughout the world manage the complexity associated with this transition.”
Write to Eric J. Savitz at [email protected]
