Cipher Digital proposes $850 million of zero-coupon converts and a stock swap of older notes

Cipher Digital said Tuesday it intends to offer $850.0 million of 0% convertible senior notes due 2032 in a private Rule 144A placement, and expects to grant buyers a 13-day option for up to $150.0 million more, while swapping some of its 1.75% notes due 2030 for common stock. Shares fell about 10% by early afternoon as investors weighed dilution and the unfinished terms of the deal.

What Cipher is trying to raise

Cipher said it intends to offer $850.0 million aggregate principal amount of the notes in a private placement to investors it reasonably believes are qualified institutional buyers under Rule 144A. It also expects to give the initial purchasers a 13-day option to buy up to an additional $150.0 million of notes.

The notes, if issued, would be senior unsecured obligations. They would not pay regular interest, and the principal would not accrete. They would mature on Nov. 1, 2032, unless earlier repurchased, redeemed or converted. Conversion terms, including the initial conversion rate, will be set when the deal is priced. Cipher would settle conversions in cash, common stock, or a mix, at its election.

Before Aug. 1, 2032, conversion would be allowed only in limited windows; after that date, holders could convert until two scheduled trading days before maturity. Cipher could redeem the notes for cash starting Nov. 5, 2029, if its share price stays above 130% of the conversion price for a stated period, and it could also redeem remaining notes if less than 10% of the original principal is still outstanding. Holders could force a cash repurchase after certain fundamental changes, and unless Cipher has already called all the notes, they could also force a cash repurchase on Nov. 1, 2030.

Stock-for-notes exchange and dilution hedges

Alongside the new issue, Cipher expects privately negotiated exchanges with a limited number of holders of its outstanding 1.75% convertible senior notes due 2030, swapping some of those notes for common shares. Participating holders may buy or sell Cipher stock or unwind hedges around the exchange, which the company said could move the share price up or down.

Cipher also plans capped-call transactions covering the shares initially underlying the new notes. Those hedges are meant to limit dilution, or cash payments above principal, if notes convert — subject to a cap. Counterparties establishing or adjusting those hedges may trade Cipher shares or derivatives around pricing and later, which can also affect the stock and the notes.

Where the money would go

Net proceeds would first pay for the capped calls. Cipher said the rest would fund additional equity investment in Barber Lake, support high-performance computing build-out across its near-term pipeline, expand its development-site pipeline, and cover general corporate purposes. Extra notes from the purchasers' option would partly fund additional capped calls.

The financing sits on top of Cipher's push into larger contracted data-center capacity. In September, Cipher said it extended the Barber Lake lease to 20 years and lifted contracted revenue on that project above $9 billion, a story TickerGrove covered at the time. Tuesday's release did not update Barber Lake's contracted revenue or say how much equity Cipher would add.

Why this raise matters now

Cipher has been funding AI and high-performance computing capacity with a mix of project debt, leases and equity-linked paper. A zero-coupon convertible of this size would add long-dated senior unsecured claims without a cash interest bill, while leaving conversion economics — and therefore how expensive the equity backstop is — to be set at pricing. The parallel exchange of older 1.75% 2030 notes for stock would retire some coupon-bearing converts but issue shares immediately, a trade investors often read as near-term dilution even when it cleans up the capital stack.

Barber Lake remains central to that story. Cipher previously said the project's contracted revenue rose above $9 billion after a lease extension to 20 years. Routing more equity into that campus, and into the broader HPC pipeline, is consistent with a developer that needs cash and balance-sheet room as tenants ramp. Tuesday's release did not refresh Barber Lake's contracted-revenue figure or say how much of the $850 million, after capped-call costs, would land there versus other sites.

Shares fall as the market digests dilution risk

Cipher shares were last at $11.68 as of about 1:42 p.m. Eastern on Tuesday, down $1.32, or about 10.2%, from Monday's close of $13.00, according to CNBC quote data. The session low of $10.68 was also the stock's 52-week low on that feed. Yahoo Finance's delayed daily chart showed a similar path, with Tuesday's last print near $11.65 after Monday's close of $13.00.

Convertible offerings and note-for-stock exchanges often pressure equity because they can increase the share count if notes convert or if exchange shares are issued. Cipher warned that the offering and the 2030 exchange remain subject to market and other conditions and may not close on the stated terms, or at all.