Tempus AI (NASDAQ:TEM) shares declined 2.6% after the precision medicine technology firm revealed plans for a $400 million offering of convertible senior notes due in 2030.
The Chicago-based company aims to use part of the proceeds to repay existing term loans, including immediately settling its $275 million 2027 term loan. This repayment is expected to lower interest costs and improve financial flexibility. Additional funds will be allocated to capped call transactions to limit dilution risk and cover general corporate expenses.
These notes will be sold to qualified institutional buyers as unsecured obligations of Tempus, with semiannual interest payments and a maturity date of July 15, 2030. Upon conversion, the company may pay in cash, shares of Class A common stock, or a combination thereof, at its discretion.
Tempus also plans to offer initial purchasers an option to buy up to an additional $60 million in notes within 13 days of the initial sale.
As part of the deal, Tempus intends to enter into privately negotiated capped call transactions with financial institutions to help reduce dilution from note conversions and offset cash payments exceeding the principal.
The company expects counterparties to establish hedges through derivatives and stock purchases near pricing, which may impact the market prices of both Tempus stock and the notes.