Cipher Digital Prices $850M Zero-Coupon Convertible Notes – Here’s How It Intends To Use The Proceeds

• Cipher Digital has set the initial conversion price at about $15.31 per share of the common stock.
• The company said it can call the notes from Nov. 5, 2029, but only if the stock trades above 130% of the conversion price.
• Cipher said it expects to exchange some of its 1.75% convertible notes due in 2030. 

Cipher Digital Inc. (CIFR) shares stayed under pressure on Wednesday after the data center operator set conversion terms for $850 million in convertible senior notes that pay no interest. The company has set the initial conversion price at about $15.31 per share of the common stock.

That’s a 35% premium to Tuesday’s close of $11.34, Cipher said in a statement. The sale is expected to close Friday. Cipher said that when it first announced the offering on Tuesday, the banks handling the deal still had a 13-day option to buy an additional $150 million in notes.

CIFR dropped over 12% on Tuesday, touching $10.68 during the session and hitting its 52-week low. CIFR stock was down more than 5% in morning trading, extending its one-week slide. On Stocktwits, retail sentiment around CIFR remained in the ‘bullish’ zone, while chatter improved to ‘extremely high’ from ‘high’ over the past day.

Cipher’s Notes Offer Early Repayment Option

Cipher said there is no regular interest on the notes and the principal will not accrete. The company may settle conversions in cash, stock or a combination of both. The benefit for buyers comes from the repayment schedule. Cipher said holders may require Cipher to buy back the notes for cash on Nov. 1, 2030, two years before maturity. The company can call the notes from Nov. 5, 2029, but only if the stock trades above 130% of the conversion price.

In connection with the sale, Cipher said it expects to exchange some of its 1.75% convertible notes due in 2030. The company pegged that at about $165.9 million of the older notes for some 40.7 million shares.

Use Of Proceeds

Cipher said net proceeds total about $835.1 million, or nearly $982.5 million if the option is fully exercised. Of that, $89.7 million will pay for capped call transactions, a hedge that offsets dilution up to a ceiling, the company said. Cipher put a cap price of $28.35 a share on the capped call transactions, a 150% premium to Tuesday’s closing price. 

The firm said that the remainder of the proceeds will be used to increase the equity stake in the Barber Lake project, build out its high-performance computing (HPC) pipeline, acquire more development sites, and fund general corporate purposes. 

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