back to article Pure Storage is to raise HALF a BEEELLLION DOLLARS for mystery corporate slurp

Pure Storage is trying to raise nearly half a billion dollars to fund its first corporate acquisition. The all-flash array biz is to sell privately-placed convertible notes to institutional buyers for $450m and will also grant initial purchasers the option to buy another $67.5m, solely to cover over-allotments. The money will …

  1. DontFeedTheTrolls
    Trollface

    They're going to need that cash to pay the tariffs on the Chinese made components they use...

    1. TheVogon Silver badge

      "on the Chinese made components they use"

      Same as everyone else then.

    2. fredesmite
      Mushroom

      name a single electronic company that doesn't use parts made in a rice paddy hut in Chinese !

      everything is outsourced to China !

  2. Anonymous Coward
    Anonymous Coward

    Maybe they are saving up to buy a soul.

  3. Anonymous Coward
    Anonymous Coward

    Zadara

    Just saying

  4. Anonymous Coward
    Anonymous Coward

    Is it all trolls ?

    Does anyone ever post anything useful as a comment?

    1. TheVogon Silver badge

      Re: Is it all trolls ?

      "Does anyone ever post anything useful as a comment?"

      If you want useful, try:

      http://bitly.com/1H9DQSz

  5. Throatwarbler Mangrove Silver badge
    Holmes

    *cough*Tintri*cough*

    1. Throatwarbler Mangrove Silver badge

      To the downvoter: you're quite right. Most likely, they'll buy EMC, just because they can. Not that Pure would have any use for that lumbering dinosaur, mind you ...

  6. WYSIWYG650

    Borrowing to keep up with the Jone's

    This looks like either a sign of weakness or a large strategic gamble or both. They cant grow fast enough or save up the money quick enough to do this without taking on additional debt. I'm sure Gartner wont view this as lack of ability to effectively execute on their vision but I sure do.

    1. Anonymous Coward
      Anonymous Coward

      Re: Borrowing to keep up with the Jone's

      Of course it's a strategic gamble. Why would it be seen as weakness to go out and borrow $450m you don't need? and also get it? It's like saying someone is weak for taking a second mortgage on a second house when they've just paid off the first. Sometimes you need to borrow the capital to expand.

      Do you remember when EMC took the strategic gamble route and went all out public and beat Netapp's butt to get Data Domain? That paid off massively as EMC had a track record of successfully integrating acquisitions while Netapp has pretty much destroyed everything they've bought.

      Fortune favours the brave (and competent)

      1. Anonymous Coward
        Anonymous Coward

        Re: Borrowing to keep up with the Jone's

        EMC did not have to raise debt to make a purchase. They paid CASH to buy Data Domain. I can't wait to read the offering prospectus and the closing details. If you read the press release announcing the terms of the cash raise, it is highly complex.

        First, it is a convertible offering, that can be paid back in cash, stock, or cash and stock. Companies with a strong balance sheet just raise debt, knowing that their return on investment exceeds the interest rate on the loan or bond. Granted, Pure gets to choose how it is paid back. But for any high growth company with zero GAAP earnings, dilution of existing shareholders can be VERY problematic, more on this later.

        Pure does appear to have shareholders in mind by entering into a Capped Call transaction to limit shareholder dilution associated with any conversions to be paid. However, this is a BIG bet. Should Pure not have the ability to pay interest or settle the principal due in 2013, they must use stock. This could be toxic to shareholders from a dilution perspective. They even acknowledge that their counterparties will enter into additional hedging transactions. Furthermore the cost of the hedge, eats into the cash they ultimately receive.

        Hedging is often associated with leverage. All of this is Financial Engineering. Financial Engineering is great until it is not. Just look at Long Term Capital Management in 1997, Procter & Gamble interest rate swaps in the mid 1990s, Collaterized debt obligations in 2007-2009, SunEdision in 2015-2016.

        Simply said, companies should raise cash in the most efficient way possible either through equity or debt. Pure could not do either, because of too high an interest rate, or dilution to shareholders, hence the Financial Engineering. When your debt is used to try and limit downsides either way, the smarter money in the market usually wins.

        As I stated before, this is all dependent on the final details of the offering in terms of interest rate, conversion of shares, and any associated triggers.

        It is also very curious that $20M will be used to buy back stock. That represents less than 1% of shares outstanding.

        Lots can be learned about these types of financing at:

        https://www.skadden.com/insights/publications/2015/05/so-youve-issued-convertible-notes-now-what

  7. fredesmite

    Have they made a profit yet ??

    In the past they haven't made a cent and were millions in debt

  8. CIA

    I'll offer a different perspective... Pure’s first three years of Evergreen contracts expire in 2018 (interesting timing huh?) and they are going to have to replace controllers as customers renew their support contracts, and Pure has spent the money they made initially and will need to fund the replacements somehow… their expenses are keeping pace with their sales (both are continuing to grow). So under the guise of acquisition, they get additional funding and they then have some running room to try to make enough money to pay off the notes when they come due. In the meantime, they try to come up with some viable additional products and hope someone buys them.

    1. Anonymous Coward
      Anonymous Coward

      We were told our controllers are only replaced when we procure another three years of maintenance after the first term. They made that quite clear up front and we are fine with that - it's still an upgrade without any downtime or us having to spend a month of evenings or weekends migrating.

      So it seems the evergreen contracts will pay for themselves when people buy the next lot of maintenance. I can't see that being a big bill anyway - back in 2015 I don't think we were above customer number 1000....so I don't think it will be that big of a hit even if you were right.

      Assume 1250 customers, 2500 controllers, $10k a piece at a guess = $25m.

  9. kiwistorageguy

    Disclosure - Pure Employee.

    Just to be clear we have already provided customers with Free every three upgrades as part of the Evergreen Gold subscription. You do not need to buy additional capacity under this part of the program to be rewarded with the latest then-current upgrade controllers.

    Upgrade Flex is when the customer has an Evergreen Gold subscription they can purchase a capacity expansion and get credit which can be used to replace the controllers mid-cycle. This is all noted in our EverGreen program description on the public website.

    1. Anonymous Coward
      Anonymous Coward

      It seems their block storage is doing pretty well given their starting point and subsequent cash burn, but maybe they need an acquisition to widen the addressable market for flash blade. File stacks take a long time to mature, so buying someone with a semi mature stack, preferably with hooks into cloud might be helpful and allow them to compete more widely in unstructured data. Given the financials it's anyone's guess as to what Pure might do next.

  10. Anonymous Coward
    Anonymous Coward

    File Stacks

    "File stacks take a long time to mature, so buying someone with a semi mature stack"

    Yep, especially if you are pretty clueless in that space.

    WFS integration blows chunks , they and their customers know it.

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