Super Micro Computer (NASDAQ:SMCI) stock plunged nearly 10% after news broke out that the company is offering $2 billion in convertible notes. This could possibly lead to some dilution for shareholders. The market capitalization here is $24.4 billion.
Regardless, this offering has spooked Wall Street. Supermicro could add $300 million to this existing $2 billion offering if there’s demand.
But now that SMCI stock is down 10%, the market may have largely priced in the dilution.
Considering SMCI stock has been long a long-term uptrend for the past few months, this may be a good time to buy more. The stock is still up 36% year-to-date and seems poised to recover in the coming months.
Management said that the remaining proceeds, after the capped-call and a $200 million concurrent share buyback, will go toward working capital, capacity expansion, and other general corporate purposes to keep pace with AI-server demand. The demand is still red hot, so the underlying financials will be better off with more funding, not the other way around.
Super Micro’s convertible notes offering has had a bad impact on the stock, but it is a good entry point for newcomers. The company has already netted enough funding for working capital and business expansion for 2025.
You should also keep in mind that dilution hasn’t taken place yet. That debt would have to be converted by investors.
If anything, the stock has a more bullish tilt to it now. Management raising capital in this way signals strong demand and that the expenses required to fulfill orders are outstripping existing funding mechanisms.
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