Uber Technologies Inc . (NYSE:UBER) has announced its plan to issue $1.2 billion in five-year convertible bonds, a strategic move aimed at addressing a significant portion of its debt obligations and minimizing potential equity dilution. The ride-hailing giant is targeting qualified institutional buyers for the Convertible Senior Notes, which are set to mature in 2028.

The offering includes an option for initial purchasers to acquire an additional $180 million in notes within 13 days post-issuance. Uber intends to allocate a part of the proceeds from this offering towards capped call transactions. These financial instruments are agreements with initial purchasers or their affiliates and come with anti-dilution adjustments, which serve to limit the dilutive impact on Uber’s equity that could result from conversions of the notes and related derivative transactions.

Despite experiencing a premarket dip of 1.7% today, Uber’s stock has shown robust annual growth, more than doubling the S&P 500’s performance as of this year’s close. This resilience reflects investor confidence and underscores the company’s solid market position.

The proceeds from the bond offering are also earmarked for redeeming existing debts, such as the $1 billion senior notes due in 2025, along with other outstanding indebtedness. Additionally, funds may be used for general corporate purposes, providing Uber with financial flexibility for its operational and strategic initiatives.

The move to manage upcoming debt maturities with the convertible bond offering indicates Uber’s proactive approach to capital management and its efforts to sustain its growth trajectory without excessively diluting current shareholders’ equity.