Two consumer tech companies refinanced their bank debt on November 10, and the price each paid says a lot about how the market sees them. Dropbox sold $1.1 billion of convertible notes at 1.25%. Peloton sold $700 million of senior secured notes at 8.625%. Both deals were upsized from the original plan. Both exist to pay off term loans.
Dropbox: cheap money with an equity kicker
Dropbox priced $1.1 billion of convertible senior notes due December 2031, up from the $1.0 billion announced a day earlier. Buyers have a 13-day option to take another $150 million. The notes pay 1.25% and convert at about $40.73 per share, a 25% premium to the $32.58 close on November 9. Settlement is November 12, with net proceeds of about $1.08 billion.
The plan for the cash: about $103 million for convertible note hedges, paired with warrants struck at about $57.02, a 75% premium, to limit dilution; $175 million to buy back shares from institutional investors at the November 9 close; and at least $750 million to repay its term loan. Dropbox’s 2028 convertible notes, issued in 2021 at 0%, are still outstanding.
The coupon is low because investors are buying an option on the stock along with the bond. The shares fell 3.3% before the open on the dilution worry. That came days after Dropbox reported flat core growth and agreed to buy Tigris Data for about $350 million to move into AI storage.
Peloton: secured, fixed and expensive
Peloton priced $700 million of senior secured notes due 2032, up from $600 million, settling November 20. Alongside the notes it plans a $200 million five-year revolving credit facility. The proceeds and cash on hand will repay its $1.0 billion term loan in full, with any remainder available for buybacks, capex or acquisitions.
An 8.625% coupon on secured debt is a high-yield price. It reflects a company still shrinking its subscriber base. But the turnaround numbers behind the deal are real: Peloton reported fiscal first-quarter revenue of about $559 million on November 5, up 2%, with a GAAP profit and a call focused on margins, EBITDA and paying down debt. Swapping a floating-rate term loan for fixed-rate notes locks in its cost and pushes out maturities.
Same move, different signal
Both companies are cleaning up bank debt while credit markets are open. The gap between 1.25% and 8.625% is the market’s verdict on two things: Dropbox’s steady cash generation and an equity story investors will pay to own, against Peloton’s thinner cushion and a recovery that still has to prove it lasts.