TeraWulf shares fell 7% following the announcement of a $425 million convertible note.
Bitcoin (BTC) mining company TeraWulf Inc. WULF shares fell more than 7% to $5.84 after the company announced it would offer $425 million in 2.75% convertible senior notes due 2030.
Matthew Sigel, head of digital asset research at VanEck, highlighted that WULF was the worst-performing stock in the VanEck Digital Transformation ETF (DAPP) on October 24.
Sigel said:
“Instead of announcing the AI/HPC customers that investors were eagerly awaiting, we announced dilutive convertible bonds.”
The current decline in Terawulf’s stock price is also a healthy retracement after an explosive 71% gain between October 9 and October 22 this month.
Daniel Marques, manager at Ernst & Young, shared that the price area around $6 on He added:
“We expect there to be a 20-30% cooling before the next move to $7-9. It’s all part of the long game.”
Operational expansion and repurchase program
TeraWulf plans to allocate the funds raised from this offering to several key areas. $115 million will be earmarked for common stock repurchases and an additional $51 million will be earmarked to fund capped call transactions designed to reduce potential dilution from the conversion of the convertible notes.
The remaining funds will support general corporate objectives, including working capital, strategic acquisitions, and expansion of data center infrastructure to further advance the company’s high-performance computing (HPC) activities.
The notes are convertible into cash, shares of common stock or a combination of the two at the Company’s discretion, based on a conversion rate of 117.9245 shares per $1,000 principal amount.
According to the announcement, this corresponds to an initial conversion price of approximately $8.48 per share, representing a 32.5% premium over TeraWulf’s stock closing price on October 23.
The company also began trading capped calls at $12.80 per share, double the October 23 closing price. A capped call is a type of derivative transaction that limits the potential loss of the counterparty selling the option. A company that issues convertible bonds.
The move aims to mitigate potential dilution and offset cash payments in excess of the principal amount of the notes upon conversion.
In particular, TeraWulf simultaneously launched a repurchase program and acquired approximately 17.97 million shares for $115 million at the closing price of $6.40 per share on October 23.
According to a statement from TeraWulf, this share buyback is expected to increase value for existing shareholders by reducing the number of shares issued.
