Moderna, Inc.

Current report

Risks related to our convertible notes

Current report

Our ability to make repayments of the principal of, to pay interest, if any, on or to refinance our indebtedness, including our outstanding 0.00% Convertible Senior Notes due 2032 (the notes), and to pay any cash amounts upon conversion of the notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional debt or equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

Current report

Holders of the notes have the right, subject to certain conditions, to require us to repurchase all or any portion of their notes upon the occurrence of a fundamental change (as defined in the indenture governing the notes) at a fundamental change repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date. Upon maturity of the notes, we must pay the principal amount of the notes plus accrued and unpaid special interest, if any, in cash, unless the notes have been previously repurchased, redeemed or converted. In addition, upon conversion of the notes, unless we elect to issue solely shares of common stock to settle conversions (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of such conversions. However, we may not have enough available cash or be able to obtain financing upon maturity of the notes or at the time we are required to make repurchases of any notes surrendered therefor or pay cash with respect to notes being converted. In addition, our credit and guaranty agreement restricts, and our future debt may prohibit us from making any cash payments on the conversion or repurchase of the notes or making any cash payments upon a fundamental change. Our ability to repurchase the notes or to pay cash upon conversions or at maturity of the notes may also be limited by law or by regulatory authority. Our failure to repurchase notes at a time when the repurchase is required by the indenture governing the notes or to pay any cash payable on future conversions or at maturity of the notes as required by the indenture governing the notes would constitute a default under the indenture governing the notes. A default under the indenture governing the notes or the fundamental change itself could also lead to a default under agreements governing our future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the notes or make cash payments upon conversions thereof.

Current report

In the event the conditional conversion feature of the notes is triggered, holders of notes will be entitled to convert their notes at any time during specified periods at their option. If one or more holders elect to convert their notes, unless we elect to satisfy our conversion obligation by delivering solely shares of common stock (other than paying cash in lieu of delivering any fractional share) we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their notes, we would be required under applicable accounting rules to reclassify all or any portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

Current report

The conversion of some or all of the notes may dilute the ownership interests of our stockholders. Upon conversion of the notes, we have the option to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock in respect of our conversion obligation. If we elect to settle our conversion obligation in shares of common stock or a combination of cash and shares of common stock, any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the notes may encourage short selling by market participants because the conversion of the notes could be used to satisfy short positions, or anticipated conversion of the notes into shares of our common stock could depress the price of our common stock.

Current report

The accounting method for reflecting the notes on our balance sheet, accruing interest expense for the notes and reflecting the underlying shares of our common stock in our reported diluted earnings per share may adversely affect our reported earnings and financial condition.

Current report

The notes are reflected as a liability on our balance sheets, with the initial carrying amount equal to the principal amount of the notes, net of issuance costs. The issuance costs were treated as a debt discount for accounting purposes, which is being amortized into interest expense over the term of the notes. As a result of this amortization, the interest expense that we expect to recognize for the notes for accounting purposes will be greater than the cash interest payments we will pay on the notes, which will result in lower reported net income or larger reported loss.

Current report

In addition, the shares of common stock underlying the notes are reflected in our diluted earnings per share using the “if converted” method. Under that method, diluted earnings per share is generally calculated assuming that all the notes were converted solely into shares of common stock at the beginning of the reporting period unless the result would be anti-dilutive. The application of the if-converted method may reduce our reported diluted earnings per share to the extent we are profitable in the future, and accounting standards may change in the future in a manner that may adversely affect our diluted earnings per share.

Current report

In addition, accounting standards may change in the future. Further, if in the future we irrevocably elect a settlement method to apply to conversions of notes, the accounting treatment for the notes could be different than described above. Accordingly, we may account for the notes in a manner that is significantly different than described above.

Current report

Certain provisions in the indenture governing the notes may delay or prevent an attempted takeover of us that might be financially advantageous to the shareholders.

Current report

Certain provisions in the indenture governing the notes may make it more difficult or expensive for a third party to acquire us. For example, the indenture governing the notes will require us, except as provided therein, to repurchase the notes for cash upon the occurrence of a fundamental change and, in certain circumstances, to increase the conversion rate for a holder that converts its notes in connection with a make-whole fundamental change. A takeover of us may trigger the requirement that we repurchase the notes and/or increase the conversion rate, which could make it costlier for a potential acquirer to engage in such takeover. Such additional costs may have the effect of delaying or preventing a takeover of us that would otherwise be beneficial to investors.

Current report

The capped call transactions may affect the market price of our common stock.

Current report

In connection with the offering of the notes, we entered into privately negotiated capped call transactions with certain financial institutions (the option counterparties). The capped call transactions cover, subject to customary adjustments, the number of shares of our common stock that initially underlie the notes. The capped call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap.

Current report

We expect that the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the notes (and are likely to do so following any early conversion, repurchase, or redemption of the notes, to the extent we unwind a corresponding portion of the capped call transactions, or if we otherwise unwind all or a portion of the capped call transactions, and during the final observation period for the conversion of notes). This activity could also cause or avoid an increase or a decrease in the market price of our common stock.

Current report

The potential effect, if any, of these transactions and activities on the market price of the common stock will depend in part on market conditions. Any of these activities could adversely affect the value of the common stock.

Current report

We cannot predict the direction or magnitude of any potential effect that the transactions described above may have on the price of our common stock.

Current report

The option counterparties are financial institutions, and we are subject to the risk that one or more of the option counterparties may default or otherwise fail to perform, or may exercise certain rights to terminate, their obligations under the capped call transactions. Our exposure to the credit risk of the option counterparties is not secured by any collateral.

Current report

Global economic conditions have from time to time resulted in the actual or perceived failure or financial difficulties of many financial institutions and could adversely affect the option counterparties’ performance under the capped call transactions. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the capped call transaction with such option counterparty. Our exposure will depend on many factors but, generally, our exposure will increase if the market price or the volatility of our common stock increases. In addition, upon a default or other failure to perform, or a termination of obligations, by an option counterparty, we may suffer more dilution than we currently anticipate with respect to our common stock.