Investing.com -- SentinelOne (NYSE: S) shares fell 7% on Tuesday after the cybersecurity company announced plans to offer $1.25 billion in convertible senior notes due 2031. The notes will be offered through a private placement to qualified institutional buyers.

The general senior unsecured notes will not bear regular interest. Upon conversion, SentinelOne maintains the discretion to settle the obligations in cash, shares of its Class A common stock, or a combination of both.

SentinelOne intends to use the net proceeds to fund privately negotiated capped call transactions and concurrently repurchase up to $150 million of its Class A common stock. Remaining funds will be allocated for general corporate purposes, which may include working capital, capital expenditures, and potential strategic acquisitions.

The capped call transactions, arranged with initial purchasers or other financial institutions, are designed to reduce potential equity dilution upon the conversion of the notes. The cap price is expected to represent a premium of at least 100% over the stock’s last reported sale price on the pricing date.

Additionally, SentinelOne has granted the initial purchasers a 13-day option to buy up to an additional $187.5 million aggregate principal amount of the notes.

In a separate move, the company disclosed it is in discussions to secure a $400 million revolving credit facility. The notes offering is not contingent upon the execution of this credit agreement.

The notes and any shares issued upon conversion have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States without registration or an applicable exemption.

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