Shares of Axon Enterprise (AXON) fell nearly 10% during Tuesday’s trading session after the company announced plans to offer $1.0 billion in zero-interest convertible senior notes maturing in 2031. The stock was trading at about $442 at the time of publication, down more than $47 per share. The announcement was reported by Blockonomi.

The notes will be unsecured senior obligations of Axon Enterprise, Inc. and will not accrue periodic interest. Unless they are converted, redeemed, or repurchased earlier, the notes are scheduled to mature on September 15, 2031.

Underwriters will have a greenshoe option to purchase an additional $150 million of notes if demand warrants, potentially increasing the total offering to $1.15 billion.

Axon may settle conversions with cash, shares of common stock, or a combination of the two. Although this flexibility is customary for convertible securities, issuing shares could result in dilution for existing shareholders. To help mitigate that potential impact, Axon plans to use part of the offering proceeds for capped call transactions.

The remaining proceeds are expected to support general corporate purposes, including growth initiatives and possible acquisitions or investments in complementary products, services, and technologies. Goldman Sachs, Morgan Stanley, JP Morgan, RBC Capital Markets, and Citigroup are serving as joint lead coordinators for the notes transaction.

Revolving Credit Facility Expanded

Axon also completed a second amendment to its existing credit agreement on Tuesday. The amendment increases the company’s revolving credit facility from $300 million to $500 million and permits an additional $150 million accordion feature if needed.

The expanded facility carries interest at SOFR plus a spread ranging from 1.25% to 1.75%. Its maturity date may be extended by as much as five years from the amendment’s closing date. The increased facility is contingent on the successful completion of the convertible notes transaction.

The amended credit agreement adds leverage and interest coverage covenant requirements. The revised terms provide Axon with additional financial capacity for expansion initiatives and potential strategic acquisitions.

Redemption Terms and Analyst Rating

Beginning September 20, 2029, Axon will have the right to redeem some or all of the outstanding notes for cash if its stock price reaches at least 130% of the conversion price for a minimum of 20 trading sessions during any consecutive 30-trading-day period.

Despite Tuesday’s decline, Wall Street’s latest analyst rating for AXON remains Buy, with a price target of $825. That target indicates potential appreciation from the stock’s level at the time of publication, although it is an analyst projection rather than a guaranteed outcome.

Before Tuesday’s decline, Axon’s market capitalization was approximately $38.94 billion. The company was trading at a price-to-earnings ratio of about 204, reflecting a premium valuation based on its growth profile.

The convertible notes have been registered as a public offering under the Securities Act of 1933 and are subject to applicable SEC disclosure requirements.