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Convertible Senior Notes | 3 Months Ended
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Mar. 31, 2021
Debt Disclosure [Abstract] |
Convertible Senior Notes | (6) Convertible Senior Notes In December 2020, the Company issued $650.0 million aggregate principal amount of 0.750% Convertible Senior Notes due 2025 (the “2025 Notes”) in a private offering. The 2025 Notes are senior unsecured obligations of the Company and bear interest at a fixed rate of 0.750% per annum, payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2021. Holders of the 2025 Notes may receive additional interest under specified circumstances as outlined in the indenture relating to the issuance of the 2025 Notes (the “2025 Notes Indenture”). The 2025 Notes will mature on December 15, 2025, unless earlier converted, redeemed, or repurchased in accordance with their terms. The total net proceeds from the 2025 Notes offering, after deducting initial purchaser discounts and issuance costs, were approximately $634.7 million. In February 2021, the Company issued $1.050 billion aggregate principal amount of 0% Convertible Senior Notes due 2027 (the “2027 Notes”) in a private offering. The 2027 Notes are senior unsecured obligations of the Company and do not bear regular interest. However, holders of the 2027 Notes may receive special interest under specified circumstances as outlined in the indenture relating to the issuance of the 2027 Notes (the “2027 Notes Indenture”). Any special interest is payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2021. The 2027 Notes will mature on February 15, 2027, unless earlier converted, redeemed, or repurchased in accordance with their terms. The total net proceeds from the 2027 Notes offering, after deducting initial purchaser discounts and issuance costs, were approximately $1.026 billion. The 2025 Notes and 2027 Notes (collectively, the “Notes”) are senior unsecured obligations and rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries. The Notes are convertible into shares of the Company’s class A common stock at initial conversion rates of 2.5126 shares and 0.6981 shares per $1,000 principal amount of Notes for the 2025 Notes and 2027 Notes, respectively (equivalent to an initial conversion price of approximately $397.99 per share and $1,432.46 per share of class A common stock for the 2025 Notes and 2027 Notes, respectively). The conversion rates are subject to customary anti-dilution adjustments. In addition, following certain events that may occur prior to the respective maturity dates or if the Company delivers a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its Notes in connection with such corporate event or notice of redemption, as the case may be, in certain circumstances as provided in the 2025 Notes Indenture and the 2027 Notes Indenture (collectively, the “Indentures”), respectively. As of March 31, 2021, the maximum number of shares into which the Notes could be potentially converted if the conversion features are triggered are 1,633,190 and 733,005 shares for the 2025 Notes and 2027 Notes, respectively. Prior to June 15, 2025 and August 15, 2026 for the 2025 Notes and 2027 Notes, respectively, the Notes are convertible only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2021 and June 30, 2021 for the 2025 Notes and 2027 Notes, respectively (and only during such calendar quarter), if the last reported sale price of the Company’s class A common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price of the 2025 Notes or 2027 Notes, respectively, on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the “trading price” (as defined in the Indentures) per $1,000 principal amount of the 2025 Notes or 2027 Notes, respectively, for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s class A common stock and the applicable conversion rate on each such trading day; (3) if the Company calls any or all of the 2025 Notes or 2027 Notes, respectively, for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; and (4) upon occurrence of specified corporate events as described in the Indentures. On or after June 15, 2025 or August 15, 2026 for the 2025 Notes and 2027 Notes, respectively, until the close of business on the second scheduled trading day immediately preceding the maturity dates of the 2025 Notes or 2027 Notes, respectively, holders may convert the 2025 Notes or 2027 Notes, respectively, at any time. Upon conversion of the Notes, the Company will pay or deliver, as the case may be, cash, shares of the Company’s class A common stock, or a combination of cash and shares of class A common stock, at the Company’s election. Prior to December 20, 2023 or February 20, 2024 for the 2025 Notes and 2027 Notes, respectively, the Company may not redeem the Notes. The Company may redeem for cash all or a portion of the 2025 Notes or 2027 Notes, at its option, on or after December 20, 2023 or February 20, 2024, respectively, if the last reported sale price of the Company’s class A common stock has been at least 130% of the conversion price of the 2025 Notes or 2027 Notes, respectively, then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides a notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company undergoes a “fundamental change,” as defined in the Indentures, prior to maturity, subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. The Indentures contain customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25% in principal amount of the outstanding 2025 Notes or 2027 Notes, respectively, may declare 100% of the principal of, and accrued and unpaid interest, if any, on, all the 2025 Notes or 2027 Notes, respectively, to be due and payable. During the three months ended March 31, 2021, none of the conversion features of the Notes were triggered and no conversions occurred during the three months ended March 31, 2021. The Notes may be convertible thereafter if one or more of the conversion conditions is satisfied during future measurement periods. As of March 31, 2021, the last reported sale price of the Company’s class A common stock for at least 20 trading days during the 30 consecutive trading days ending on, and including, March 31, 2021 was greater than or equal to 130% of the conversion price of the 2025 Notes on each applicable trading day. Therefore, the 2025 Notes are convertible at the option of the holders of the 2025 Notes during the second quarter of 2021. As discussed in Note 2, Recent Accounting Standards, to the Consolidated Financial Statements, the Company adopted ASU 2020-06 effective January 1, 2021. Although the Notes each contain embedded conversion features, the Company accounts for each of the Notes in its entirety as a liability because the conversion features are indexed to the Company’s own stock and meet the criteria for classification in stockholders’ equity and therefore do not qualify for separate derivative accounting. The Company incurred approximately $15.3 million and $24.2 million in customary offering expenses associated with the 2025 Notes and 2027 Notes, respectively (“issuance costs”). The Company accounts for these issuance costs as a reduction to the principal amount of the 2025 Notes and 2027 Notes, respectively, and amortizes the issuance costs to interest expense over the contractual term of the 2025 Notes and 2027 Notes, respectively, at an effective interest rate of 1.23% and 0.39%, respectively. As of March 31, 2021, the net carrying value of the Notes was classified as a long-term liability in the “Convertible senior notes, net” line item in the Company’s Consolidated Balance Sheet. The following is a summary of the Company’s convertible debt instruments as of March 31, 2021 (in thousands):
|  | Principal |  |  | Unamortized |  |  | Net Carrying |  |  | Fair Value
|  | Amount |  |  | Issuance Costs |  |  | Amount |  |  | Amount |  | Leveling
2025 Notes |  | $ | 650,000 |  |  | $ | (14,349 | ) |  | $ | 635,651 |  |  | $ | 1,258,654 |  | Level 2
2027 Notes |  |  | 1,050,000 |  |  |  | (23,737 | ) |  |  | 1,026,263 |  |  |  | 877,979 |  | Level 2
Total |  | $ | 1,700,000 |  |  | $ | (38,086 | ) |  | $ | 1,661,914 |  |  | $ | 2,136,633 |  |
The fair value of the Notes is determined using observable market data other than quoted prices, specifically the last traded price at the end of the reporting period of identical instruments in the over-the-counter market (Level 2). For the three months ended March 31, 2021, interest expense related to the Notes was as follows (in thousands):
|  | Contractual |  |  | Amortization of |  |  |  |  |
|  | Interest Expense |  |  | Issuance Costs |  |  | Total |
2025 Notes |  | $ | 1,219 |  |  | $ | 739 |  |  | $ | 1,958 |
2027 Notes |  |  | 0 |  |  |  | 433 |  |  |  | 433 |
Total |  | $ | 1,219 |  |  | $ | 1,172 |  |  | $ | 2,391 |
The following table shows the future contractual payments related to the Notes (semi-annual interest payments and principal upon maturity), based on the expected due dates of the various installments as of March 31, 2021 (in thousands):
Payments due by period ended March 31, |  | 2025 Notes |  |  | 2027 Notes |  |  | Total |
2022 |  | $ | 4,740 |  |  | $ | 0 |  |  | $ | 4,740 |
2023 |  |  | 4,875 |  |  |  | 0 |  |  |  | 4,875 |
2024 |  |  | 4,875 |  |  |  | 0 |  |  |  | 4,875 |
2025 |  |  | 4,875 |  |  |  | 0 |  |  |  | 4,875 |
2026 |  |  | 655,078 |  |  |  | 0 |  |  |  | 655,078 |
Thereafter |  |  | 0 |  |  |  | 1,050,000 |  |  |  | 1,050,000 |
Total |  | $ | 674,443 |  |  | $ | 1,050,000 |  |  | $ | 1,724,443 |

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