CIFR Stock On Track To Hit 6-Month Low After Cipher Digital Plans To Sell $850M Convertible Notes

• Cipher Digital shares fell more than 12% in early trading on Tuesday.
• The company announced plans to sell $850 million in zero-interest convertible notes.
• The notes will mature on Nov. 1, 2032, with conversion terms to be determined when the offering is priced.

Cipher Digital Inc. (CIFR) shares are on track to hit their 6-month low in early morning trade on Tuesday, after the data center operator said it plans to sell $850 million of convertible notes that will pay no interest.

The firm said it will sell the notes in a private placement to major institutional investors and give the banks managing the sale a 13-day window to buy an additional $150 million. The notes are set to mature on Nov. 1, 2032. However, Cipher said the final terms, including the price at which the notes turn into stock, will be set when the deal is priced.

CIFR stock was down more than 12% in pre-market trade, on track to hit a six-month low. CIFR stock hit its June high at $30 and is down about 50% from that peak. 

On Stocktwits, it was the top trending ticker at the time of writing. Retail sentiment around CIFR remained in the ‘bullish’ zone, accompanied by ‘high’ chatter levels over the past day.

No Interest 

Cipher said the notes will not pay regular interest, and the principal will not rise over time.  Upon conversion of the notes, Cipher may choose to receive cash, shares or a combination of both. That leaves shareholders vulnerable to dilution instead of an interest bill.

Swaps Add Pressure

Cipher said it will negotiate confidentially with a limited number of holders of its 1.75% notes due 2030, swapping some of the debt for ordinary shares. That will introduce new shares to the market today, rather than years from now.

Cipher also indicated that those holders could take further action. The company said they could either sell their shares or close hedges related to the 2030 notes based on their positions, at Cipher’s election. The firm added that such actions will likely change the price of its shares.

Cipher said it will enter into transactions known as capped calls with the banks on the deal. A capped call is a derivative that hedges against dilution when the notes convert, but only to a point. Those hedges will be set up by banks that will probably trade our stock around the pricing of the notes and again as they approach maturity, Cipher added.

Funds Will Go Toward AI Data Center Expansion

Cipher plans to use some of the money to buy back shares under a capped call, and the remainder for more equity in its Barber Lake project, to build out its high-performance computing pipeline, develop more sites, and for general corporate purposes. However, none of it is reserved for mining. 

CIFR has been down over 21% so far this year and has lost nearly 23% in the last 12 months. 

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