IMAX Moves To Reduce Dilution With New Convertible Offering

IMAX Corporation (IMAX) has priced $220 million of 0.75% convertible senior notes due 2030 in a private offering to qualified institutional buyers. Initial purchasers have a 13-day option to acquire up to an additional $30 million of notes.

The senior unsecured notes will bear interest at 0.75% annually, payable semi-annually beginning May 15, 2026, and will mature on November 15, 2030.

Before August 15, 2030, noteholders may convert their notes only if certain conditions are met; from and after August 15, 2030, conversions may occur at any time until the second scheduled trading day before maturity.

Also Read: IMAX Crushes Earnings, Defying A Slumping Hollywood Box Office

Conversion Price and Proceeds

The initial conversion price is approximately $42.42 per share, reflecting an initial conversion rate of 23.5743 shares per $1,000 principal amount and a 30% premium to IMAX’s November 3 closing price of $32.63.

IMAX (IMAX) expects net proceeds of roughly $212 million, or approximately $241.1 million if the option to purchase additional notes is fully exercised.

Use of Proceeds and Note Repurchases

Together with cash on hand and approximately $50 million of borrowings under its revolving credit facility, IMAX (IMAX) plans to enter into capped call transactions ? expected to cost approximately $19.3 million initially ? and repurchase $229.7 million aggregate principal of its 0.50% Convertible Senior Notes due 2026.

The company paid approximately $276.0 million, including accrued interest, to fund these repurchases.

Capped Call Transactions to Reduce Dilution

The transactions extend IMAX’s debt maturity profile and are structured to mitigate dilution. The newly executed capped call agreements carry an initial cap price of approximately $57.10 per share (exact value $57.1025), about a 75% premium to the last closing price.

These instruments are designed to offset potential dilution and/or cash payments above principal in the event of note conversions.

Beginning November 20, 2028, IMAX (IMAX) may redeem the notes for cash if its stock trades above 130% of the conversion price for a specified period.

Price Action: IMAX (IMAX) shares closed 0.43% higher at $32.63 on Monday.

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