Applied Digital Corporation Announces Upsize and Pricing of $375 Million of Convertible Notes Offering

Core Viewpoint - Applied Digital Corporation has announced the pricing and upsize of its offering of $375 million in 2.75% Convertible Senior Notes due 2030, aimed at enhancing its digital infrastructure for High-Performance Computing applications [1] Transaction Details - The offering consists of $375 million in 2.75% Convertible Notes with a 32.5% conversion premium [2] - The initial cap price for capped call transactions is set at $14.72 per share, representing a 100% premium over the closing price of $7.36 on October 30, 2024 [2] - The company plans to repurchase approximately $84 million in shares of common stock as part of the offering [2] - An option for initial purchasers to buy an additional $75 million in Convertible Notes is available within a 13-day period after the initial issuance [2] Use of Proceeds - The estimated net proceeds from the offering are approximately $361.8 million, or $434.5 million if the additional notes option is fully exercised [3] - Approximately $84 million of the net proceeds will be allocated for share repurchases, with $52.7 million for prepaid forward repurchase and $31.3 million for direct share buybacks [3] - Around $43.1 million will be used for capped call transactions, with the remainder for general corporate purposes [3] Convertible Notes Details - The Convertible Notes will accrue interest at 2.75% per annum, payable semi-annually, and will mature on June 1, 2030 [4] - The initial conversion rate is set at 102.5431 shares per $1,000 principal amount, equating to an initial conversion price of approximately $9.75 per share [5] - The company may redeem the Convertible Notes starting December 1, 2027, under specific conditions [6] Share Repurchase Program - The share repurchase program includes a prepaid forward repurchase and concurrent buybacks totaling approximately $84 million [8] - The prepaid forward repurchase involves approximately 7.2 million shares, with the forward counterparty paying equivalent cash dividends to the company [9] - This program is designed to facilitate derivative transactions and hedge positions for investors in the Convertible Notes [9][10] Capped Call Transactions - Capped call transactions have an initial cap price of $14.72 per share, aimed at reducing potential dilution upon conversion of the Convertible Notes [13][14] - The company expects that the option counterparties will engage in purchasing shares and entering derivative transactions, which may influence the market price of the common stock [15]