Upstart Holdings Issues $500M Convertible Notes, Shares Down 5.76%

Upstart Holdings has announced the issuance of $500 million in convertible senior notes to fund capped call transactions and repurchase existing notes. Shares declined 5.76% pre-market, but analysts' average one-year price target suggests a 12.43% upside from the current stock price. The average recommendation of 2.6 indicates a "Hold" investment stance. GuruFocus estimates a potential downside of 26.53% compared to the current trading price.

Upstart Holdings, Inc. (NASDAQ: UPST) has announced its intention to issue $500 million in convertible senior notes, with the proceeds earmarked for capped call transactions and the repurchase of existing notes. The notes, which are due in 2030, will be offered to qualified institutional buyers under Rule 144A [1]. The company expects to grant initial purchasers an option to purchase an additional $75 million in notes within a 13-day period.

The notes will bear interest payable semi-annually in arrears and will be convertible into cash, shares of Upstart’s common stock, or a combination thereof. The interest rate, initial conversion rate, and other terms will be determined at the time of pricing. Upstart intends to use the net proceeds from the offering for general corporate purposes, including the repayment or retirement of existing debt.

Shares of Upstart declined by 5.76% in the pre-market session following the announcement. Analysts, however, remain bullish on the company's prospects. The average one-year price target is $74.00, reflecting a 12.43% upside from the current stock price. The average recommendation of 2.6 indicates a "Hold" investment stance [2]. GuruFocus estimates a potential downside of 26.53% compared to the current trading price.

Upstart Holdings provides credit services through its proprietary, cloud-based, artificial intelligence lending platform. The company's market capitalization is below industry averages, reflecting a smaller scale relative to peers. Over the 3M period, Upstart showcased positive performance with a revenue growth rate of 66.96%. However, the company faces challenges in achieving strong profitability, with a net margin of -1.15% and ROE of -0.37% [3].

References:
[1] https://www.businesswire.com/news/home/20241111643622/en/Upstart-Announces-Proposed-Private-Offering-of-%24425000000-of-Convertible-Senior-Notes-Due-2030
[2] https://www.benzinga.com/insights/analyst-ratings/25/08/46932018/a-glimpse-into-the-expert-outlook-on-upstart-hldgs-through-8-analysts
[3] https://www.benzinga.com/insights/analyst-ratings/25/08/46932018/a-glimpse-into-the-expert-outlook-on-upstart-hldgs-through-8-analysts