Cipher Digital Shares Fall After Company Proposes $850 Million Zero-Coupon Convertible Notes Offering

NEW YORK — Shares of Cipher Digital Inc. fell sharply Tuesday after the data-center developer said it intends to offer $850 million of zero-interest convertible senior notes due 2032 and to exchange a portion of its existing 2030 notes for common stock.

The stock traded near $10.85 in morning activity, down about 16.5 percent from the prior close, according to market data. The company said the offering is subject to market and other conditions and will be made privately to qualified institutional buyers under Rule 144A. Initial purchasers will have a 13-day option to buy up to an additional $150 million of the notes.

The notes will mature on Nov. 1, 2032, unless earlier repurchased, redeemed or converted. Prior to Aug. 1, 2032, they will be convertible only upon certain conditions and during certain periods; thereafter they will be convertible at any time until the close of business on the second scheduled trading day before maturity. Cipher may settle conversions in cash, shares or a combination of both.

Concurrently, the company expects to enter into separate, privately negotiated transactions to exchange a portion of its outstanding 1.75 percent Convertible Senior Notes due 2030 for common shares with a limited number of holders. The company noted that holders participating in the exchange may buy or sell shares in the open market to adjust their positions, which could affect trading volume and price.

Cipher said it intends to use the net proceeds to fund the cost of capped-call transactions related to the new notes and to apply the remainder to additional equity investment in its Barber Lake project, build-out of its high-performance computing pipeline, expansion of its development-site pipeline, and general corporate purposes. The notes will be senior unsecured obligations.

The financing announcement follows a Sept. 25 statement in which Cipher said it expanded the Barber Lake lease term to 20 years, increasing contracted revenue to more than $9 billion, including about $5.2 billion of incremental rent from an additional 10-year term. The company has described itself as a developer, owner and operator of industrial-scale data centers focused on high-performance computing workloads.

Morgan Stanley recently lowered its price target on the shares to $51.50 from $54 while maintaining an Overweight rating, according to published reports. No company executive was quoted in the Oct. 13 announcement beyond the formal description of the offering and its intended uses. The proposed transaction has not closed. The size of any dilution from the note exchange or future conversions has not been specified by the company. The market reaction on Oct. 13 reflected investor response to the financing plan as disclosed.