ON Semiconductor Corporation (ON) has completed a $1.3 billion offering of zero-coupon convertible notes, a move that underscores its capital management strategy amid a recovering chip cycle. The notes, which mature in 2031 and carry a conversion premium of approximately 52.5% above the May 6 closing price, are set to close on Monday, May 12. The transaction was detailed in a May 7 filing with the SEC.
Net proceeds from the deal are expected to reach roughly $1.28 billion. Of that amount, $331.9 million is earmarked for share repurchases, targeting about 3.1 million shares. The remaining funds will be directed toward general corporate purposes, which may include debt repayment. This financing follows a period of volatile stock performance and comes as the company looks to strengthen its balance sheet.
The chipmaker’s shares closed Friday at $103.20, up from Thursday’s $100.61, though still below the $105.77 reference price for the notes. Trading volume dropped sharply to 10.8 million shares from 19.2 million the previous day, according to LSEG data on ON Semiconductor’s investor site.
The deal arrives on the heels of first-quarter results that showed revenue of $1.51 billion and a GAAP loss of 8 cents per share. On a non-GAAP basis, earnings stood at 64 cents per share. Gross margin was 38.5%. CEO Hassane El-Khoury noted that the company has moved beyond the cyclical trough, citing improving demand throughout the quarter. CFO Thad Trent highlighted strong operating leverage, with operating income rising 10% year-over-year on just 5% revenue growth.
ON Semiconductor is seeing growth in key areas, particularly AI data-center revenue, which surged over 100% from a year ago and climbed more than 30% sequentially. This growth is driven by wider adoption of its power management solutions, including chips and modules that manage electrical flow in server racks. The company’s EliteSiC devices target 900-volt electric vehicle systems, enabling faster charging and greater efficiency. Deeper collaborations with automakers Geely and NIO are also underway.
The silicon carbide power chip market remains highly competitive, with Infineon, STMicroelectronics, and Wolfspeed among the major players. According to Mordor Intelligence, ON Semiconductor, along with these firms, dominates the tightly held market. However, the company faces headwinds including bloated customer inventories and EV sales that have lagged forecasts, as reported by Reuters earlier this year.
Potential dilution for existing shareholders could occur if ON Semiconductor’s stock climbs above the $211.54 warrant strike price. Hedge counterparties may also engage in trading or hedging activities that affect stock movements before the notes mature. The company’s strong cash position—$2.00 billion in cash and equivalents, plus $400 million in short-term investments, against $3.00 billion in gross long-term debt—provides a buffer.
Investors are now weighing whether this opportunistic fundraising, following a stock rally, signals confidence in the company’s recovery story or adds complexity as it seeks to validate its auto and AI chip growth narrative. ON Semiconductor has also been actively buying back shares, having repurchased $346 million during the first quarter, roughly 160% of free cash flow.
