Cleanspark upsize leaves investors disappointed
In a controversial manoeuvre, Cleanspark opted to upsize a new 6.25-year convertible bond issue despite the deal being priced at the investor-friendly ends of talk amid growing investor concern over the amount of money being spent on AI infrastructure.
Cantor and BTIG priced the US$1.15bn CB offering overnight on Monday at a zero percent coupon and 27.5% conversion premium, the wide-end of the fixed zero percent and 27.5%–32.5% talk. That was an increase from US$1bn at launch and followed an earlier wall-cross.
The bitcoin miner/high-performance computing provider’s shares fell 6.6% on Tuesday to US$14.05 and traded late in the week at US$11.98, amid widespread selling of AI infrastructure plays. The new CBs traded at 83–84 at that lower share price, according to LSEG data.
“I get it, Cantor is commission-based,” said one convert arb fund manager. “But to upsize and price at the wide-end is aggressive.”
Cleanspark management is hyper-aggressive and like most in the AI business views upside as unlimited.
Cleanspark bought back US$460m of stock concurrent with the CB, about 10% of the outstanding, and loaned those shares to arbs to delta-hedge downside exposure.
That contrasts with the company’s decision to purchase a capped call with a 100% strike on a US$650m zero percent coupon CB offering issued in December, while also buying back US$145m of stock concurrently.
The share repurchase is a superior solution to stock dilution if the shares perform, relative to a capped call whose upside benefit is confined by price and a specific timeframe.
Cleanspark last month acquired land in Texas and executed long-term power supply agreements for 285MW to develop an AI data centre. It agreed to pay cash upfront, which it funded with borrowings from a bitcoin-backed US$400m revolving credit facility.
Cleanspark separately had agreed to collaborate with modular AI data centre developer Submer on liquid-cooled AI centres.
The CB proceeds will fully repay the US$174.5m of borrowings under the revolving credit facility, on which it pays an 8.5% rate.
The rapid-fire deal execution, which began with a wall-cross over the prior weekend, allowed Cleanspark management to talk about their plans for the money raised at Cantor’s annual crypto and AI energy infrastructure conference that began on Monday evening.