Cloudflare, Inc. (NYSE: NET) announced a proposed private offering of $2.175 billion in convertible senior notes due August 15, 2031, according to a company statement.

The notes will be offered to qualified institutional buyers under Rule 144A of the Securities Act of 1933. Cloudflare also expects to grant initial purchasers an option to buy up to an additional $325 million in notes, to be settled within a 13-day period beginning on the first day the notes are issued.

The notes will be senior, unsecured obligations bearing interest payable semi-annually. Upon conversion, Cloudflare may settle in cash, Class A common stock, or a combination of both, at the company's election. The interest rate, conversion rate, and other terms will be set at pricing.

Cloudflare plans to use a portion of the proceeds to fund capped call transactions intended to offset potential dilution to Class A common stock. The cap price for these transactions is expected to represent a premium of at least 150% over the last reported sale price of Cloudflare's Class A common stock on the New York Stock Exchange on the pricing date.

The remaining net proceeds are earmarked for general corporate purposes, which may include working capital, capital expenditures, repayment of existing debt, and potential acquisitions or strategic transactions.

The notes and any shares issuable upon conversion have not been registered under the Securities Act and may not be offered or sold in the United States absent an applicable exemption from registration requirements.