Moderna, Inc. (NASDAQ:MRNA) stock is trading lower on Thursday after the company proposed a private placement of $2 billion of convertible senior notes due in 2032.

The company intends to channel the net proceeds toward expanding its oncology operations, paying down debt, and funding capped call transactions.

Earlier in August, Moderna stock soared after the company and Merck & Co Inc. (NYSE:MRK) shared topline data from individualized cancer therapy for advanced skin cancer.

The company released positive topline results from the Phase 3 INTerpath-001 trial of adjuvant treatment with intismeran autogene (intismeran; V940 or mRNA-4157) in combination with Keytruda (pembrolizumab), in patients with completely resected stage IIB-IV melanoma.

Read Also: Moderna's Intismeran Close to Keytruda Style Oncology Opportunity: Analyst

$2 Billion Private Placement

Alongside the primary $2 billion offering, Moderna grants initial purchasers a 13-day window to acquire up to an additional $300 million in aggregate principal amount of the notes.

These securities will function as general senior unsecured obligations for the company. Notably, the notes will not carry regular interest, nor will their principal amount accrete over time.

Upon conversion, Moderna maintains the right to settle the notes using cash, shares of its common stock, or a combination of both options. The company will finalize the specific terms, including the initial conversion rate, during the actual pricing of the notes.

Funding Oncology Growth And Managing Dilution

To strategically manage potential stock dilution resulting from the conversion of these notes, Moderna will enter into privately negotiated capped call transactions with various financial institutions or option counterparties.

These financial agreements aim to offset any cash payments Moderna must make that exceed the principal amount of the converted notes.

The cap price for these transactions will likely begin at a premium of at least 150% above the common stock’s last reported sale price on the offering’s pricing date.

Furthermore, should the initial purchasers exercise their option for the additional $300 million in notes, Moderna expects to allocate a portion of those extra proceeds toward executing additional capped call transactions.

MRNA Stock Price Activity: Moderna shares were down 5.18% at $141.91 during premarket trading on Thursday, according to Benzinga Pro data.

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