Bitcoin(BTC)miningfirmTeraWulfInc.WULFstocksfellover7%to$5.84followingthefirm’sannouncementofa$425millionofferingof2.75%convertibleseniornotesduein2030.
VanEckheadofdigitalassetsresearchMatthewSigelhighlightedthatWULFwastheworst-performingshareinVanEckDigitalTransformationETF(DAPP)onOct.24.
Sigelstated:
“InsteadofAnnouncinganAI/HPCCustomer,WhichInvestorsAreEagerlyAwaiting,TheyAnnouncedaDilutiveConvertible.”
ThecurrentdeclineinTerawulf’ssharepriceisalsoahealthyretracementfollowingablistering71%climbthismonthbetweenOct.9andOct.22.
Ernst&YoungmanagerDanielMarquessharedonXthatthepriceareaaround$6isactingas“heavyresistance,”withstrengthindicatorsshowingthatthiswouldbeachallengingareatogetthroughintheshortterm.Headded:
“Iexpecta20-30%cooloffbeforethenextmoveto$7-9.Allpartofthelongtermgame.”
Expandingoperationsandrepurchasingprogram
TeraWulfintendstoallocatethefundsraisedfromthisofferingtoseveralkeyareas,with$115millionearmarkedfortherepurchaseofcommonstockandanadditional$51milliontofinancecappedcalltransactionsdesignedtoreducepotentialdilutionfromtheconversionoftheconvertiblenotes.
Theremainingfundswillsupportgeneralcorporatepurposes,whichmayincludeworkingcapital,strategicacquisitions,andtheexpansionofdatacenterinfrastructuretofurtherdevelopthecompany’shigh-performancecomputing(HPC)activities.
Thenoteswillbeconvertibleintocash,sharesofcommonstock,oracombinationofboth,atthecompany’sdiscretion,basedonaconversionrateof117.9245sharesper$1,000principalamount.
Accordingtotheannouncement,thisisequivalenttoaninitialconversionpriceofapproximately$8.48pershare,representinga32.5%premiumoverTeraWulf’sstock’sclosingpriceonOct.23.
Additionally,thecompanyhasenteredintocappedcalltransactions,withacappriceof$12.80pershare—doubletheclosingpriceonOct.23.Acappedcallisatypeofderivativetransactionthatlimitsthepotentiallossofacounterpartysellinganoptiontoacompanyissuingconvertiblebonds.
Themoveaimstomitigatepotentialdilutionandoffsetanycashpaymentsexceedingtheprincipalamountofthenotesincaseofconversion.
Notably,TeraWulfhasconcurrentlylaunchedarepurchaseprogram,acquiringapproximately17.97millionsharesofcommonstockfor$115millionattheOct.23closingpriceof$6.40pershare.
AccordingtoTeraWulf’sstatement,thisrepurchaseisexpectedtoenhancevalueforexistingshareholdersbyreducingthenumberofoutstandingshares.
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