Applied Digital Completes $450 Million Convertible Notes Offering

Applied Digital Corporation has successfully concluded its private offering of 2.75% Convertible Senior Notes due 2030, with the aggregate principal amount reaching $450 million. The offering, which closed on November 4, 2024, was conducted under a purchase agreement involving initial purchasers including Goldman Sachs & Co. LLC, Cantor Fitzgerald & Co., and J.P. Morgan Securities LLC.

The notes were sold at 100% of their principal amount, generating approximately $434.5 million in net proceeds after deductions for Initial Purchasers’ discounts, commissions, and offering expenses. Applied Digital plans to utilize a significant portion of the proceeds, approximately $84 million, for common stock repurchases connected to the offering. This includes funding prepaid forward repurchase costs and direct common stock buybacks. Around $51.8 million of the net proceeds will go towards covering costs related to the capped call transactions, with the remainder allocated for general corporate purposes.

Applied Digital, headquartered in Dallas, TX, has also entered into an indenture with Wilmington Trust, National Association, as trustee, concerning the notes. These senior unsecured obligations carry an interest rate of 2.75% annually, with interest payments due semiannually starting June 1, 2025. Holders have conversion options from March 1, 2030, onwards. If certain events occur earlier or upon redemption, the conversion rate may be adjusted as detailed in the Indenture.

Until December 1, 2027, Applied Digital cannot redeem the notes. However, post this date, the Company may choose to redeem the notes for cash should certain conditions be met. In the case of a “fundamental change,” holders may request the repurchase of their notes for cash at a determined price.

The Company also engaged in a prepaid forward repurchase transaction and capped call transactions associated with the offering. These transactions are separate from the notes terms and do not alter holders’ rights. The prepaid forward repurchase, costing approximately $52.7 million, ensures payments in the event of cash dividends on common stock.

Moreover, the capped call transactions, initiated at a cost of about $51.8 million, aim to minimize potential stock dilution upon note conversion. These transactions, executed with selected financial institutions, come with a cap price of approximately $14.72, indicating a premium over the last reported stock price.

Following the notes offering conclusion, Applied Digital issued a press release on November 4, 2024. Additionally, risk factors and detailed information on the transactions have been disclosed, emphasizing the consideration of potential market impacts and future financial dynamics.

As a participant in this offering, your future dealings may be influenced by the discussed transactions, their associated risks, and market implications. It is advised to consider the listed factors and their potential impact on your interests.

This article was generated by an automated content engine and was reviewed by a human editor prior to publication. For additional information, read Applied Digital’s 8K filing here.

About Applied Digital

Applied Digital Corporation designs, develops, and operates datacenters in North America. Its datacenters provide digital infrastructure solutions to the high-performance computing industry. The company also provides artificial intelligence cloud services, high performance computing datacenter hosting, and crypto datacenter hosting services.