Applied Digital raises $50 million in private financing

DALLAS - Applied Digital Corporation (NASDAQ:APLD), specializing in the design and operation of digital infrastructure for High-Performance Computing (HPC), announced Friday that it has raised $53.2 million through a private financing deal, issuing convertible preferred stock and netting $50 million in proceeds. Wes Cummins (NYSE:CMI), CEO of Applied Digital, stated that this capital would expedite the company's expansion and support the ongoing construction of its Ellendale HPC data center.

The convertible preferred stock, valued at $1,000 per share, carries an 8% interest rate, payable in kind or cash. The investor, whose identity was not disclosed, has been issued 53,191 shares, including 3,191 shares reflecting a 6% original discount. Subject to shareholder approval, this stock will be convertible into common shares at $7.00 each, significantly above the current stock price, unless a reset feature is activated.

Applied Digital plans to allocate the investment towards growth initiatives across its business segments. Northland Capital Markets facilitated the transaction as the sole placement agent, while Lowenstein Sandler LLP provided legal counsel.

The securities involved have not been registered under the Securities Act of 1933 and are not available for sale in the U.S. without registration or an exemption from registration requirements. Applied Digital has committed to filing a resale registration statement with the Securities and Exchange Commission for the common stock shares potentially issued upon conversion.

Applied Digital operates next-generation data centers that cater to the HPC industry's needs, with more information available on their website.

The details provided are based on a press release statement, and the company cautions that the release contains forward-looking statements subject to various risks and uncertainties. These could affect the company's actual results, including but not limited to, the volatility of the crypto asset industry, regulatory compliance, capital access, and third-party relationships.

In other recent news, Applied Blockchain Inc has been the subject of attention from H.C. Wainwright and Roth/MKM, following its impressive earnings of $43.3 million for the quarter, surpassing both the previous quarter's $40.3 million and market expectations of $37.6 million. Despite operational interruptions at the Ellendale site, the company's resilience was highlighted, with H.C. Wainwright maintaining a Buy rating and a price target of $5.00. Roth/MKM, on the other hand, adjusted Applied Blockchain's price target to $10, citing increased GPU depreciation and high-performance computing costs in the company's fourth-quarter earnings report.

Simultaneously, Applied Digital reported a substantial rise in Q4 revenues to $43.7 million from $22 million year-over-year, albeit with a widened net loss to $64.8 million from $6.5 million in the same quarter last year. The company has successfully developed its cloud services and data center hosting businesses, secured over $150 million in financing, and executed a Letter of Intent with a U.S. hyperscaler for 400 megawatts at the Ellendale campus.

These recent developments underscore the strategic progress of both companies. Applied Blockchain's growth hinges on finalizing a formal lease agreement and securing potential project financing. Similarly, Applied Digital is nearing the completion of a lease agreement with a hyperscaler and expects sequential revenue improvements in the coming quarter.

InvestingPro Insights

As Applied Digital Corporation (NASDAQ:APLD) secures funds to fuel its growth and the development of its Ellendale HPC data center, investors are closely monitoring the company's financial health and market performance. According to InvestingPro data, Applied Digital has a market capitalization of $559.83 million, which provides a sense of the company's size in the competitive tech landscape. Despite a challenging market, the company's revenue growth is notable, with an impressive 198.92% increase over the last twelve months as of Q4 2024. This aligns with analysts' expectations of sales growth for the current year, an InvestingPro Tip that suggests a positive outlook for the company's top-line performance.

However, it's not all smooth sailing for Applied Digital. The company's P/E ratio stands at -2.92, indicating that investors are currently facing losses, and the adjusted P/E ratio for the last twelve months as of Q4 2024 is even lower at -4.02. This may reflect concerns about the company's profitability, as analysts do not anticipate Applied Digital will be profitable this year, another InvestingPro Tip that investors may consider. Additionally, the stock price has experienced significant volatility, with a 1-week total price return of -16.04% as of the specified date in 2024, underscoring the high-risk nature of investing in this sector.

For those considering an investment in Applied Digital, it's worth noting that the company operates with a significant debt burden and is quickly burning through cash, two critical factors highlighted by InvestingPro Tips. These insights, along with over 10 additional tips available on InvestingPro, can help investors make more informed decisions by understanding the underlying financials and market sentiment surrounding Applied Digital.

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