Applied Digital Corp. (NASDAQ:APLD), previously known as Applied Blockchain, Inc., has filed a Certificate of Designations with the Nevada Secretary of State to initiate an offering of Series E-1 Redeemable Preferred Stock, the company disclosed in an SEC filing on Thursday.
The Dallas-based computer processing and data preparation services company, Applied Digital, stated that it designated 62,500 shares of preferred stock as Series E-1 Preferred Stock in connection with the offering, which aims to raise up to $62.5 million.
This move follows the withdrawal of Certificates of Designations for Series A, B, and D Preferred Stock on October 24, 2024, leaving 2,224,309 shares of undesignated preferred stock available.
The Series E-1 Preferred Stock will rank senior to common stock and on par with other preferred stocks like Series E and Series F Preferred Stock regarding dividend payments and liquidation rights. The stock will carry a cumulative dividend rate of 9% per annum, with dividends declared and accrued monthly. However, dividends are contingent on board approval and availability of legally accessible funds.
In terms of redemption, holders of the Series E-1 Preferred Stock will have the option to redeem their shares at any time, subject to early redemption fees if redeemed within three years of issuance. The company may settle these redemptions in cash or common stock, though the latter option is limited by a 19.99% cap of outstanding common stock unless shareholder approval is obtained to exceed this limit.
Applied Digital also reserves the right to redeem the shares after the second anniversary of their issuance. Additionally, in the event of a holder's death, the estate can request redemption of the shares without an early redemption fee, a provision that lasts until December 31st of the year marking the third anniversary of the issuance.
The Series E-1 Preferred Stock does not have voting rights, preemptive rights, sinking fund, or conversion features. This offering is part of Applied Digital's strategy to raise capital while providing investors with an opportunity to invest in preferred stock with defined terms.
Investors are advised that this information is based on a press release statement from Applied Digital Corp. and should consider the company's SEC filings for complete details.
In other recent news, Applied Digital Corporation has announced the pricing of its $375 million convertible senior notes due 2030, targeted at qualified institutional buyers. The company has also initiated a share repurchase program worth approximately $84 million. The net proceeds from the offering, estimated at approximately $361.8 million, will fund the share repurchase program, pay for the capped call transactions, and support general corporate purposes.
In addition, Applied Digital reported a significant increase in revenue, reaching $60.7 million, primarily due to its cloud services and 286MW North Dakota BTC facilities. However, the company also posted a net loss of $21.6 million.
Analyst firms H.C. Wainwright, Lake Street Capital Markets, and Craig-Hallum have upgraded their stock price targets for Applied Digital, acknowledging its robust revenue growth and key project progress.
Applied Digital has also simplified its capital structure by withdrawing the designations of its Series A, Series B, and Series D Convertible Preferred Stock. In terms of executive changes, Saidal Mohmand has assumed the role of Chief Financial Officer, with David Rench transitioning to the role of Chief Administrative Officer.
Finally, Applied Digital is nearing the completion of a high-performance computing lease with a major hyperscaler and has secured a $160 million private placement, which included investments from Nvidia (NASDAQ:NVDA) and Related Companies. These are among the recent developments for Applied Digital as it continues to progress on its current projects and strategic investments.
InvestingPro Insights
Applied Digital Corp.'s recent move to offer Series E-1 Redeemable Preferred Stock aligns with its current financial situation and market performance. According to InvestingPro data, the company has experienced significant revenue growth, with a 124.03% increase in the last twelve months. This growth trajectory is further supported by an InvestingPro Tip indicating that analysts anticipate sales growth in the current year.
However, investors should note that Applied Digital is currently not profitable, with an operating income margin of -47.83% in the last twelve months. This is reflected in an InvestingPro Tip stating that the company is quickly burning through cash. The new preferred stock offering could be seen as a strategic move to secure additional capital to support its growth and operations.
Despite these challenges, Applied Digital has shown strong market performance, with a 64.45% price total return over the past year. This aligns with another InvestingPro Tip highlighting the stock's high return over the last year.
For investors considering this new preferred stock offering, it's worth noting that Applied Digital does not currently pay a dividend to shareholders, as per an InvestingPro Tip. The 9% cumulative dividend rate on the new Series E-1 Preferred Stock could therefore be attractive to income-seeking investors.
InvestingPro offers 19 additional tips for Applied Digital, providing a more comprehensive analysis for investors interested in this rapidly growing but volatile stock.
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