Super Micro issues $700M in convertible notes

Super Micro Computer, Inc. (NASDAQ:SMCI), a global leader in high-performance, high-efficiency server technology and innovation with a market capitalization of $34.8 billion, has entered into a material definitive agreement, issuing $700 million in convertible senior notes, as revealed in a recent SEC filing.

According to InvestingPro analysis, the company currently trades near its Fair Value, while maintaining a "GREAT" financial health score.

The company, headquartered in San Jose, California, closed the offering of 2.25% Convertible Senior Notes due 2028 on Thursday. The unsecured obligations are set to mature on July 15, 2028, unless earlier redeemed, repurchased, or converted. Interest will be paid semi-annually, starting July 15, 2025. Super Micro intends to utilize the proceeds for general corporate purposes, including funding working capital to support growth and business expansion.

With a strong current ratio of 3.77 and moderate debt levels, InvestingPro data shows the company is well-positioned to manage this additional debt while maintaining financial flexibility.

The notes will be redeemable at the company’s discretion after March 1, 2026, under certain conditions, and holders will have the right to require Super Micro to repurchase their notes upon a fundamental change, as defined in the indenture. Initial conversion rates are set at approximately 16.3784 shares of common stock per $1,000 principal amount of notes, equivalent to a conversion price of about $61.06 per share.

This move follows the company’s amendments to their existing indenture, which included the issuance of new certificates for the Amended 2029 Notes and adjustments to the capped call transactions with several banking institutions.

These amendments have increased the interest rate on the Amended 2029 Notes to 3.50% and adjusted the initial conversion rate to approximately 11.9842 shares per $1,000 principal amount.

The convertible notes were sold to specified institutional investors, in accordance with exemptions from registration under the Securities Act. The sale may potentially result in the issuance of up to 17,197,320 shares of Super Micro’s common stock upon conversion of the new notes, and up to 42,379,110 shares upon conversion of the amended 2029 notes, subject to customary anti-dilution adjustments.

Super Micro’s strategic financial maneuvering through these convertible notes offerings and indenture amendments reflects its commitment to fostering growth and maintaining a strong position in the competitive tech industry. The company’s impressive revenue growth of 109.77% over the last twelve months validates this strategy.

For deeper insights into Super Micro’s financial health and growth prospects, including 18 additional ProTips and comprehensive valuation metrics, explore the detailed Pro Research Report available on InvestingPro.

In other recent news, Supermicro has reported strong earnings for the second quarter of fiscal year 2025, with preliminary revenue figures between $5.6 billion and $5.7 billion, reflecting a 54% increase year-over-year. This surge is largely driven by the demand for AI-related platforms, which accounted for over 70% of the quarter’s revenue.

The company has revised its fiscal year 2025 revenue guidance to a range of $23.5 billion to $25 billion, down from the previous $26 billion to $30 billion. Despite this revision, Supermicro remains optimistic about achieving a $40 billion revenue target for fiscal year 2026.

Supermicro’s future outlook is bolstered by the commencement of the NVIDIA (NASDAQ:NVDA) Blackwell ramp and a successful $700 million convertible senior notes offering, which aims to support the company’s cash flow needs. Analyst firms have also weighed in, with Loop Capital raising its price target for Supermicro to $50 and maintaining a Buy rating, citing the company’s progress in regulatory compliance and expected growth from upcoming product lines. Meanwhile, JPMorgan raised its price target to $35 but maintained an Underweight rating, citing concerns about supply chain uncertainties and increased competition in the AI server market.

Additionally, Supermicro is actively addressing its financial reporting challenges, with plans to complete its fiscal year 2024 audit by the February 25, 2025 deadline.

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