Supermicro shares fell nearly 10 percent on Monday after the company announced a $2 billion convertible bond offering maturing in 2030.
According to SiliconAngle, the company stated that the proceeds from the sale will be used for general corporate purposes, including working capital for growth and expansion of its operations. Supermicro is reserving approximately $200 million for the repurchase of shares from bondholders.
Supermicro has recently become one of the biggest beneficiaries of growth in the artificial intelligence industry, thanks to rising demand for Nvidia graphics processors, which power the company’s servers.
According to Supermicro, an additional $300 million in bonds could potentially be issued. The company is offering the bonds exclusively to qualified institutional investors. They can only convert the bonds into shares or cash under certain conditions.
The decline in the share price is not surprising. The subsequent conversion of convertible bonds often results in the dilution of the value of existing shares.
Supermicro as an AI pure player
Even with the recent decline, Supermicro’s share price is still up more than 34 percent this year. The company is one of the few server manufacturers with access to the latest chips from Nvidia, as well as those from Advanced Micro Devices and Intel Corp. Wall Street investors often view Supermicro as an AI pure-play. Many expect the rise in value to continue as hyperscale data center operators deliver on their promises to invest billions in AI infrastructure.
Supermicro recently received a boost after landing a significant contract with Humain, a new AI company backed by Saudi Arabia’s Public Investment Fund. The agreement was finalized after US President Donald Trump’s visit to the country in May.
The company’s stock has had a volatile year. The share price fell sharply when concerns were raised about its accounting practices. This fueled fears that the company would be delisted from the Nasdaq. Ultimately, Supermicro submitted its delayed financial reports at the last minute, leading to a new record high for the stock. However, investor enthusiasm faded again in May when Supermicro lowered its outlook due to uncertainties surrounding import tariffs.