CleanSpark Announces Pricing of $550M Convertible Notes Offering at $14.80 Per Share

Highlights:

• CleanSpark will offer the notes due in 2030 with a 0.00% interest rate and a 20% conversion premium.
• The company will use the funds for share buybacks and to pay off debt.
• CleanSpark has entered into capped calls to limit stock dilution and help stabilize the company’s share price.

CleanSpark has launched a $550 million offering of convertible notes due in 2030. The company will offer the notes to institutional buyers and sell them under Rule 144A of the Securities Act of 1933. Additionally, CleanSpark has given the initial purchasers the option to buy up to an additional $100 million in notes. The company expects to close the offering on December 17, 2024, subject to customary closing conditions.

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— CleanSpark Inc. (@CleanSpark_Inc) December 13, 2024

The convertible notes bear a 0.00% interest rate and a 20% conversion premium. CleanSpark has entered into capped call transactions related to the notes. The cap price of the capped call agreements is $24.66 per share, which is 100% above the company’s stock closing price of $12.33 on December 12, 2024.

Key Features of the Notes

The convertible notes are unsecured obligations. The notes do not carry regular interest, and their principal amount will not increase over time. CleanSpark will mature the notes on June 15, 2030, unless it repurchases, redeems, or converts them earlier. Before December 15, 2029, the company can only convert the notes under specific conditions. After that date, it can convert the notes at any time until the second business day before maturity.

The conversion rate is set at 67.5858 shares of common stock for every $1,000 principal amount. This rate is equivalent to an initial conversion price of $14.80 per share, a 20% premium above the closing stock price of $12.33 on December 12, 2024. In some cases, CleanSpark will adjust the conversion rate.

If market conditions meet the required criteria, CleanSpark can redeem the notes for cash starting June 20, 2028. These conditions include the stock price exceeding 130% of the conversion price for 20 consecutive trading days.

Holders of the notes will have the right to request that CleanSpark repurchase the notes on June 15, 2028. They can also require repurchase if a fundamental change occurs within the company. In either case, CleanSpark will pay the principal amount of the notes, plus any accrued special interest.

Planned Use of Proceeds from the Offering

The company expects to receive net proceeds of approximately $535.9 million after fees and expenses. CleanSpark plans to spend about $76.5 million of the net proceeds to fund the cost of the capped call transactions. These transactions aim to mitigate potential dilution from the convertible notes. The company also intends to use $145 million to repurchase its common stock from the investors in the offering.

The company will allocate the remaining proceeds to various corporate needs, including paying off amounts owed under the company’s line of credit with Coinbase. In addition, CleanSpark plans to use some funds for capital expenditures, acquisitions, or general corporate purposes.

Other corporations are increasingly adopting convertible note offerings to raise funds. Riot Platforms, a leading Bitcoin mining company, recently announced a $500 million convertible note offering.

Impact on Stock and Market Activity

The offering and the related capped call transactions may affect the price of CleanSpark stock. Financial institutions that participate in the offering will likely enter into hedging transactions.

If the notes are converted, CleanSpark may issue shares. However, the capped call transactions are structured to limit the increase in share count and minimize dilution. The company has not registered the offering under U.S. securities laws and will offer it only to qualified institutional buyers.

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