Snowflake Upsizes a Zero-Coupon Convertible to $3.75 Billion, Pushing Dilution Risk Into 2029

Snowflake priced an upsized private placement of \$3.75 billion in 0.00% convertible senior notes on Sept. 29, split into \$2.0 billion maturing in October 2029 and \$1.75 billion maturing in October 2031. The deal was upsized from the \$3.5 billion the company flagged a day earlier, and is expected to close on Oct. 1. The notes carry no regular interest and their principal does not accrete, and they were offered to qualified institutional buyers under Rule 144A.

The conversion terms tell you how much equity upside banks had to promise to place the paper. The 2029 notes convert at roughly \$500.38 per share, a 52.5% premium to Snowflake's Sept. 28 close, and the 2031 notes at about \$483.98, a 47.5% premium. Snowflake also entered capped call transactions with a cap price of \$820.30 a share — a 150% premium to the same reference price — spending about \$383.5 million to blunt the dilution if the stock runs.

Net proceeds are estimated at approximately \$3.70 billion, or about \$4.24 billion if initial purchasers exercise in full their options for an extra \$300 million of 2029 notes and \$250 million of 2031 notes. Of that, about \$548.3 million is earmarked to repurchase roughly \$261.8 million in principal of Snowflake's existing 2027 zero-coupon convertibles. The rest is for general corporate purposes, which the company says may include share buybacks and acquisitions or strategic investments.

The structure changed between announcement and pricing in a way that matters for timing. The original proposal was \$1.3 billion of 2029 notes and \$2.2 billion of 2031 notes. The priced deal shifted \$700 million toward the nearer 2029 tranche and cut the 2031 tranche by \$450 million, while adding \$250 million overall — concentrating convertible exposure earlier on the curve rather than spreading it out.

Zero-coupon convertibles let a company borrow without a cash interest bill and let investors trade income for equity optionality. For an issuer, the trade is straightforward: you accept future dilution, and you buy capped calls to reduce it. The cost is real and immediate — \$383.5 million here, roughly a tenth of the gross raise — and the benefit only materializes if the stock cooperates.

The context is a market that has grown noticeably more careful about AI-era debt. Snowflake shares were trading around \$326 on Sept. 29, down about 0.6%, and the broader conversation about AI infrastructure financing has shifted from how much capital is available to what it costs and who ultimately repays it, as bond yields have risen and investors have started scrutinizing the leverage behind data-centre buildouts.

What this deal shows is that large, unsecured, no-interest paper remains available to a company with Snowflake's revenue base and enterprise footprint — investors took a 47% to 52% conversion premium and accepted zero coupon. But the shape of the deal is telling too. By upsizing and tilting toward the earlier maturity, Snowflake is funding itself further out without pushing the whole burden to the far end of the decade. If AI data spending keeps climbing, the cheap money will look prescient. If growth slows, the 2029 tranche becomes the date when a paper-only liability has to be resolved — in cash, in stock, or in a refinancing market that may not be as friendly.