Shares of DigitalOcean Holdings, Inc. (NYSE:DOCN) declined 4.4% on Wednesday after the cloud infrastructure company revealed a plan to repurchase as much as $500 million of its convertible senior notes.
The company said it aims to repurchase the majority of its 0.00% convertible senior notes due 2030 through privately negotiated transactions. Funding for the repurchases will come from a registered direct offering of common stock to holders of the notes who agree to participate in the repurchase.
Structure and intended effects
DigitalOcean described the transaction as one that is expected to lower net leverage while producing minimal change to the company's cash balances or the total number of shares outstanding. Repurchased notes will be retired, and the company expects that shares issued in the offering will be largely offset by the shares underlying the repurchased notes.
To address any incremental dilution that may arise from shares issued in the offering, DigitalOcean said it plans to use its existing share repurchase authorization to buy back those shares. The company also noted that the transaction creates capacity to support expansion of its AI-Native Cloud.
Pricing mechanics and timeline
The repurchase price for each participating note will be determined using a volume-weighted average price (VWAP) of DigitalOcean's common stock following execution of the applicable note purchase agreement with each participating holder. That VWAP will be measured over the next trading day, which the company indicated is expected to be July 15, 2026.
DigitalOcean expects the transactions to close on July 23, 2026, subject to customary closing conditions.
Market and procedural notes
The company cautioned that certain participating noteholders may buy or sell shares in the open market or enter into derivative transactions to unwind hedge positions. Such actions by holders could have an adverse effect on the trading price of DigitalOcean's common stock.
J. Wood Capital Advisors LLC is acting as financial advisor for the placement. The offering is being made pursuant to an effective shelf registration statement on file with the SEC.
Summary of the corporate action
- Planned repurchase: Up to $500 million of 0.00% convertible senior notes due 2030.
- Funding mechanism: Registered direct offering of common stock to participating noteholders.
- Expected close date: July 23, 2026; repurchase price VWAP measurement expected July 15, 2026.
The company said repurchased notes will be retired and that it will use existing share repurchase authorization to counteract any incremental dilution resulting from the offering.