Applied Digital to Raise $375M in Convertible Notes Issuance

Bitcoin mining colocation and cloud servicing firm Applied Digital is poised to raise $375 million through a private offering of convertible notes as the mining industry increasingly turns to debt financing strategies.

Applied Digital initially announced a $300 million private offering of convertible notes on Wednesday after market close, and later stated in a follow-up release that the offering had been upsized to $375 million. Additionally, the initial purchasers have been granted an option to acquire up to an additional $75 million.

The convertible notes feature an interest rate of 2.75% and are set to mature in 2030. Applied Digital intends to use part of the proceeds to cover the costs of entering into capped call transactions, a financial instrument designed to hedge against potential shareholder dilution related to the issuance of a convertible note. The company also plans to allocate approximately $84 million of the proceeds toward share buybacks.

Applied Digital joins a growing list of public companies in the Bitcoin mining sector issuing convertible notes, following similar actions taken in recent months by firms such as Core Scientific, MARA, Bitdeer, Hut 8, and Terawulf.

While Applied Digital does not directly participate in proprietary Bitcoin mining, it does provide data center hosting services for companies like MARA. In the quarter ending August 31, Applied Digital reported a revenue of $60.7 million, with $34.8 million of that total derived from its Bitcoin mining hosting segment.

Since 2023, the company has diversified its data center operations by offering additional cloud services and high-performance computing (HPC) capacities. The cloud services business accounted for the remaining 43% of Applied’s most recent quarterly revenue, although the HPC segment did not generate any revenue.