Applied Digital Corporation (NASDAQ: APLD) shares fell by nearly 6% to $6.92 following the announcement of a $375 million convertible notes offering, as detailed in an SEC 8-K filing on October 31, 2024. The offering, which is set to close on November 4, 2024, involves 2.75% Convertible Senior Notes due 2030, with a conversion premium of 32.5% and an initial conversion price of approximately $9.75 per share. The company plans to use the net proceeds of approximately $361.8 million for share repurchases, capped call transactions, and general corporate purposes.
The market's reaction reflects concerns over potential dilution and the impact of the convertible notes on the company's capital structure. The offering includes a share repurchase program of approximately $84 million, which aims to mitigate dilution effects. However, the stock's decline suggests investor apprehension about the long-term implications of the debt issuance and its effect on shareholder value.