- TeraWulf is to raise $350 million by use of convertible notes, aiming to buy back $200 million worth of its shares.
- The company’s strategy includes capped call transactions to prevent stock dilution and keep share prices steady.
- TeraWulf’s notes will be available to institutional buyers, allowing flexible payment options and potential growth in shareholder value.
TeraWulf is raising $350 million using convertible notes in order to have enough money for repurchasing shares valued at $200 million. Institutional buyers will be able to purchase these convertible senior notes with a 2030 maturity by adhering to the Securities Act of 1933 Rule 144A. This move is consistent with TeraWulf’s intention to repurchase shares and boost shareholder value using its sizeable cash position.
Convertible Notes and Terms of Issuance
The time frame for the conversion of the company’s convertible notes under certain circumstances ends in November 2029. Interest on these senior unsecured liabilities will be paid in arrears on a semi-annual basis beginning in May 2025.
After that, they will be convertible whenever they are elected, until their maturity in 2030. Additionally, within 13 days of the notes’ issuance, TeraWulf is offering initial buyers the opportunity to buy an additional $75 million worth of notes.
This funding mechanism will also include capped call transactions to minimize potential stock dilution. These transactions, executed with one or more financial institutions, will enable TeraWulf to manage stock price fluctuations tied to the notes’ conversion. Furthermore, the capped calls will provide TeraWulf flexibility in meeting its financial obligations during the notes’ life span.
Impact on Stock and Conversion Options
TeraWulf’s plan to utilize convertible notes allows it to repurchase shares concurrently with the note pricing. Consequently, this strategy could stabilize or even raise the stock price by fostering additional demand.
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Additionally, option counterparties might hedge their positions by buying or selling shares, possibly impacting TeraWulf’s stock value. Such activities could influence the conversion rate of the notes, which TeraWulf has structured to provide flexible payment options—either in cash, shares, or a combination of both, based on the company’s decision.
The private offering will be limited to qualified institutional buyers, meaning the notes and potential shares will be unregistered under the Securities Act. Hence, this fundraising strategy could mitigate regulatory delays while adhering to compliance protocols.
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