Why Hive Digital Technologies Stock Slumped Today
Key Points
It aims to issue $75 million in exchangeable senior notes.
Buyers will eventually be able to swap these for equity, cash, or a mix of both.
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Hive Digital Technologies (NASDAQ: HIVE), one of several cryptocurrency miners pushing deeper into data center operations, had a forgettable Thursday on the stock exchange. After the company announced a new round of financing, investors sold out of its shares, leaving them with a nearly 12% loss that trading session.
A $75 million plan
After market close on Wednesday, Hive announced that one of its wholly owned subsidiaries plans to issue $75 million in exchangeable senior notes in a private offering. The company added that the target investors are institutional buyers.
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Management also intends to grant the initial purchasers of the notes a 13-day option to collectively buy an additional $15 million worth of the securities.
Hive's notes will be exchangeable under certain conditions, although the company did not specify these. It did write that they will be exchangeable for cash, Hive's common stock, or a combination of the two, at the company's discretion. The notes do not pay interest, and details such as the exchange rate will be determined at pricing.
More money for hard assets
In the press release announcing the flotation, Hive said that it aims to use the proceeds raised for investments, mentioning specifically the purchase of graphics processing units (GPUs) and data center development. Some funds might be directed to general corporate purposes.
Since at least part of this issue is likely to result in the creation of new shares, investors were understandably worried about dilution. $75 million is no drop in the bucket for Hive, given its current market cap of just over $553 million. While I wouldn't panic-sell the stock on this news, I'd keep a sharp eye on how that notes issue goes, and how the company deploys the proceeds.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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