DALLAS - Applied Digital Corporation (NASDAQ:APLD), a company specializing in the design, construction, and operation of digital infrastructure for High-Performance Computing (HPC) applications, announced its intention to offer $300 million in convertible senior notes due 2030. This private offering, targeted at qualified institutional buyers, is contingent on market conditions and other factors, with no certainty as to the completion, timing, or terms of the offering.
The offering also includes an option for initial purchasers to acquire an additional $45 million in notes within a 13-day period from the issuance date. Applied Digital aims to allocate a portion of the net proceeds to fund capped call transactions, which are expected to minimize dilution from the conversion of notes or offset excess cash payments required upon conversion.
Concurrently with the offering, the company plans to repurchase up to one-third of the final aggregate principal amount of the convertible notes through privately negotiated transactions at prices expected to match the closing stock price on the pricing date. The remainder of the proceeds will be used for general corporate purposes.
The notes, which will be senior unsecured obligations, will accrue interest payable semi-annually and will mature on June 1, 2030, unless earlier repurchased, redeemed, or converted. Conversion of the notes will be subject to specific conditions and periods before March 1, 2030, and will be freely convertible until two days before the maturity date.
In connection with the offering, Applied Digital anticipates entering into a prepaid forward stock purchase transaction with one of the initial purchasers or their affiliates. This transaction is intended to facilitate derivative transactions related to the company's common stock, potentially affecting its market price and the conversion price of the notes.
Moreover, the company expects to engage in capped call transactions with initial purchasers or other financial institutions, which could influence the market price of the common stock or the notes at the time of pricing and following the transaction.
The convertible notes and any common stock issuable upon conversion have not been registered under the Securities Act or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption.
This article is based on a press release statement from Applied Digital Corporation.
In other recent news, Applied Digital Corporation has made significant strides in its financial and organizational structure. The company announced a considerable increase in revenue, reaching $60.7 million, mainly due to its cloud services and 286MW North Dakota BTC facilities. Despite this, the company posted a net loss of $21.6 million. Analyst firms H.C. Wainwright, Lake Street Capital Markets, and Craig-Hallum have all raised their stock price targets for Applied Digital, acknowledging its robust revenue growth and key project progress.
Applied Digital has also simplified its capital structure by withdrawing the designations of its Series A, Series B, and Series D Convertible Preferred Stock. This move, interpreted by some as a strategic adjustment, was not accompanied by a specific reason in the company's filing.
In terms of executive changes, Saidal Mohmand has assumed the role of Chief Financial Officer, with David Rench transitioning to the role of Chief Administrative Officer. These changes are part of a series of executive team reshuffles at Applied Digital.
The company is nearing the completion of a high-performance computing lease with a major hyperscaler, currently 98% finalized and has secured a $160 million private placement, which included investments from Nvidia (NASDAQ:NVDA) and Related Companies. These developments reflect a series of recent actions taken by Applied Digital as it progresses on its current projects and strategic investments.
InvestingPro Insights
Applied Digital Corporation's (NASDAQ:APLD) recent announcement of a $300 million convertible senior notes offering comes amid a period of significant growth and volatility for the company. According to InvestingPro data, APLD has experienced remarkable revenue growth, with a 124.03% increase in the last twelve months as of Q1 2025. This growth trajectory aligns with the company's need for capital to fund its expansion in the High-Performance Computing sector.
However, investors should note that APLD's financial health presents a mixed picture. The company's gross profit margin stands at a slim 3.04%, indicating potential challenges in profitability. This is further underscored by an InvestingPro Tip which points out that APLD suffers from weak gross profit margins. Additionally, the company is not currently profitable, with a negative operating income of $90.86 million in the last twelve months.
Despite these challenges, the market seems optimistic about APLD's prospects. The stock has shown strong performance, with a 190.94% price total return over the past six months. This aligns with another InvestingPro Tip highlighting the stock's large price uptick over the last six months.
It's worth noting that APLD's stock is known for its volatility, as indicated by an InvestingPro Tip. This volatility could be a factor for potential investors to consider, especially in light of the upcoming convertible notes offering and its potential impact on stock price.
For investors seeking a more comprehensive analysis, InvestingPro offers 18 additional tips for APLD, providing a deeper dive into the company's financial health and market position.
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