Bilibili Unveils $500M Convertible Debt Play With Hedging Strategy and Buyback Program
Chinese video platform Bilibili (NASDAQ: BILI) has launched a multi-pronged financial strategy combining debt issuance, sophisticated investor hedging mechanisms, and shareholder returns. The company proposed a $500 million offering of convertible senior notes due 2030, with an option for underwriters to purchase an additional $75 million. Concurrently, Bilibili will facilitate a “Delta Offering” – borrowing existing Class Z shares from third parties to help convertible bond investors hedge positions – while separately repurchasing up to $100 million worth of its own shares.
Proceeds will target content ecosystem expansion, user growth initiatives, and operational scaling. The convertible notes carry lower interest rates than conventional debt due to their equity conversion feature, while the share buyback signals management’s confidence in long-term value creation. Notably, the Delta Offering prevents immediate dilution by using borrowed shares rather than issuing new equity.
Key Advantages
- Convertible structure secures capital at favorable rates while delaying potential dilution
- Share repurchase underscores confidence in valuation amid sector volatility
- Delta Offering mechanics protect against near-term stock price pressure
- Reinvestment plan aligns with Gen-Z content consumption trends in China
Execution Risks
- Total potential $575M debt adds leverage to balance sheet
- Future conversion could dilute existing shareholders by ~3-5%
- Complex transaction may require investor education efforts
Market Mechanics Behind the Move
Bilibili’s three-dimensional capital strategy balances growth funding with shareholder optics.
The convertible notes’ pricing will likely reflect market appetite for Chinese tech equities and conversion premiums typically between 25-35%. By structuring the Delta Offering through share lending rather than new issuance, Bilibili avoids ballooning its float while enabling convertible arbitrageurs to short against their bond positions – a nod to institutional investor demands.
The $100 million buyback serves dual purposes: it absorbs some borrowed shares from the Delta Offering and signals commitment to capital discipline. Analysts suggest the combined maneuvers could create an “equity collar” effect, stabilizing BILI’s stock during the capital raise.
Industry observers note the timing aligns with China’s tightening scrutiny on equity fundraising. “This debt-focused approach may help Bilibili navigate regulatory headwinds while funding its content war against rivals like Douyin and Kuaishou,” said Zhou Wei, Shanghai-based media tech analyst.
05/21/2025
Deal Particulars
Conversion Terms
The 2030 notes’ conversion price is expected to be set at 30-35% above BILI’s 10-day trading average prior to pricing. Final terms will be determined during bookbuilding.
Hedging Impact
Goldman Sachs and Morgan Stanley will manage the Delta Offering, creating synthetic short positions equivalent to ~20-25% of the convertibles’ equity value.
Monetization Context
Bilibili’s advertising+livestream revenue grew 38% YoY in Q1 2025, with gross margins improving to 26%. The capital infusion aims to accelerate high-margin IP development.
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