Check Point raises $1.75 billion, potentially eyeing AI expansion
Investors flock to the first-ever convertible bond sale, fueling speculation on the company’s next moves.
A year after taking over as CEO of Check Point, Nadav Zafrir is steering the company into a move it never made under Gil Shwed’s tenure: the cybersecurity giant raised $1.75 billion in convertible bonds for the first time in its history.
Check Point had initially planned to raise $1.5 billion, but strong demand led to an increase. Underwriters also have an option to participate in an additional $250 million, potentially bringing the total to $2 billion.
For many technology companies, raising debt is routine. But for Check Point, a “cash cow” generating roughly $250 million in operating cash flow each quarter, this is unprecedented. The bonds are convertible into shares, carry zero interest, and mature in 2030. Comparable Israeli deals include Wix, which raised $1 billion, and CyberArk, which secured $1.25 billion in June before its $25 billion sale to Palo Alto Networks.
Institutional investors quickly snapped up these offerings, as seen in similar deals where the amount raised significantly exceeded initial targets. With this bond issuance, combined with cash reserves of about $3 billion at the end of Q3, Check Point’s total liquidity approaches $5 billion.
Why raise funds despite a strong cash position and a stock near all-time highs, valuing the company at $20 billion? Simply put: the opportunity exists, and investors are willing to provide “free money.” The only cost is potential dilution if the bonds are eventually converted into shares.
In most cases though, such bonds are not converted, and all issuances of this type typically include a protection mechanism in the event of a sharp increase in the stock price. However, this also applied in the past, and Check Point never gave in to these advances.
The primary rationale for the fundraising is strategic: preparing for substantial investments in artificial intelligence, including potential acquisitions. Since Zafrir’s arrival, Check Point acquired Swiss company Lakera for approximately $300 million to enhance AI capabilities in its security solutions. Yet, investors expect more ambitious moves, particularly as the cybersecurity market is rapidly evolving due to AI. Attackers gain new tools, but AI also enables the development of advanced defensive solutions.
At the time of the Lakera acquisition, Zafrir framed the deal as “just the beginning”: “Check Point has previously led the internet security revolution, and we are going to lead the AI cybersecurity revolution. This acquisition shows we are willing to invest significantly to offer the best solutions to our customers.”
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Wall Street now anticipates a game-changing AI acquisition from Check Point, particularly given the company’s previous lag in cloud innovations, which allowed competitors like Palo Alto Network, currently valued at $130 billion, to pull ahead.
Additionally, in May, Check Point announced the recruitment of 500 new employees to bolster AI development, a challenging task due to the limited availability of experienced talent. Hiring AI specialists comes with higher costs than the company has traditionally incurred.
Check Point’s core challenge is not financing but identifying an AI company with mature, proven technology that justifies the high valuation amid current market hype. Competitors, including Palo Alto and Shlomo Kramer’s Cato Networks, have already made large AI deals, leaving few viable targets available.
