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https://investors.atlassian.com/financials-and-filings/news/...

Atlassian just issued convertible notes. Their current cash is ample enough to run the business so a likely conclusion is they'll use this for acquisitions.

This is the same type of convoluted financing PSTG did - convertible notes with a capped call.

I *think* I understand it now.

Upon maturity, par value of the notes will convert into shares if the price is above, in this case, $81.52 (42% premium to today's price). $1,000 gets you 12.27 shares at maturity. Atlassian wants the price to be as high as possible at maturity so dilution is limited.

However, the note holders want the price to be low (buy low) upon maturity. So, they've negotiated a cap on the transaction which in this case is a 100% premium to today's price. That is the most they will pay for shares. That is the only reason the note holder would accept the paltry interest rate of 0.625% annually for these notes. They are likely quite bullish.

I believe the above is correct, but feel free to critique it.

Thanks,
A.J.
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