Applied Digital Enters Into a $150 Million Convertible Preferred Equity Facility to Advance Development of Ellendale Multi-Building HPC Campus

Rhea-AI Summary

Applied Digital has secured a $150 million convertible preferred equity facility to advance its Ellendale High Performance Computing (HPC) data center campus. The 36-month facility allows the company to draw funds in $25 million increments at its discretion, with no minimum commitments or penalties.

Key features of the facility include:

• Preferred stock priced at $1,000 per share with no preferred dividends
• 4% original issue discount
• Convertible to common stock at 95% of lowest daily VWAP or $4.25, whichever is greater
• 4.99% beneficial ownership cap and 19.99% NASDAQ blocker provision

CEO Wes Cummins confirms the capital will support the development of their second data center while completing construction on their first facility at the Ellendale campus. Northland Capital Markets served as Sole Placement Agent for this private financing arrangement with institutional investors.

Positive

• Access to $150M flexible financing facility with no mandatory draws or penalties
• Company maintains full control over timing and amount of capital draws
• No preferred dividends or returns required on the convertible preferred stock
• Minimum conversion price floor set at $4.25 protects against excessive dilution
• Proceeds will fund development of second data center at Ellendale HPC Campus

Negative

• 4% original issue discount on preferred stock adds to financing cost
• Potential dilution for existing shareholders upon conversion of preferred stock
• Convertible shares can be sold after just 45 days from issuance
• 95% conversion price of lowest 5-day VWAP could pressure stock price
• Additional registration costs for filing resale registration statements

Insights

Financial Analyst

Applied Digital secures flexible $150M financing facility for data center expansion without immediate obligations, supporting growth with controlled dilution risk.

This $150 million convertible preferred stock facility provides Applied Digital significant financial optionality without immediate obligations. The structure contains notably favorable terms: no preferred returns or dividends, a modest 4% original issue discount, and completely discretionary draws in $25 million increments over 36 months.

The conversion mechanics are structured to protect shareholder value - the preferred stock converts at the greater of 95% of the lowest 5-day VWAP or $4.25 per share. This $4.25 floor establishes a minimum conversion price, providing partial protection against dilution. Additional safeguards include ownership caps preventing investors from acquiring more than 4.99% of outstanding common stock and a 19.99% blocker for NASDAQ compliance.

The company maintains complete control over timing and utilization, with no penalties for non-use and no minimum draw requirements. This allows management to access capital precisely when needed for the Ellendale campus development while optimizing the timing of any potential dilution. The proceeds will fund development of the Ellendale HPC Campus and general corporate purposes.

Tech Infrastructure Expert

Applied Digital's financing supports strategic HPC data center expansion, enabling phased campus development without immediate capital constraints.

This financing arrangement specifically targets development of Applied Digital's Ellendale High Performance Computing data center campus. The company is implementing a phased infrastructure approach - they're nearing completion on their first data center at this campus while simultaneously securing capital for their second facility on the same property.

The CEO's statement explicitly highlights this strategic capital deployment: "This facility gives us flexibility to access capital that will be used to progress the build-out of our second data center while nearing completion on the construction on our first data center on that campus." This indicates a methodical expansion approach rather than attempting to build multiple facilities simultaneously.

High-performance computing infrastructure requires substantial upfront investment in power delivery systems, cooling, and specialized server architecture. The $150 million facility provides the financial runway to execute on this capital-intensive expansion while maintaining flexibility on deployment timing. This supports the company's focus on developing purpose-built infrastructure for HPC applications, which they describe as their central business focus in the article.

Draws on the Facility are at the Company’s discretion; The Company will provide an update on a lease for the Company’s Ellendale High Performance Computing data center campus (the “Ellendale HPC Campus”) in the near term

DALLAS, April 30, 2025 (GLOBE NEWSWIRE) -- Applied Digital Corporation (Nasdaq: APLD) ("Applied Digital" or the "Company"), a designer, builder, and operator of next-generation digital infrastructure for HPC applications, announced today that the Company entered into a private financing arrangement with institutional investors (the “Investors”), pursuant to which the Company has the right, but not an obligation, to sell up to $150 million of a newly created series of convertible preferred stock to the Investors.

The convertible preferred stock issuable under the equity facility (the “Facility”) has a stated value and purchase price of $1,000 per share, bears no preferred return or preferred dividends, and will be sold at an original issue discount of four percent. The Facility has a term of 36 months, over which the Company can draw up to $150 million at its discretion, in increments of $25 million, as long as certain conditions are met. Applied Digital retains full control over the timing and amount of any sales to the Investors, with no obligation to utilize any of the $150 million available under the Facility. Draws cannot be initiated by the Investor, and there are no minimum commitments or penalties for non-use. The Company plans to use the proceeds from draws under the Facility to fund development of the Ellendale HPC Campus and for general corporate purposes.

The preferred stock is convertible into shares of the Company’s common stock beginning on the earlier of 45 days after the first issuance of preferred stock or when a registration statement covering their resale is declared effective by the U.S. Securities and Exchange Commission, at an initial per share conversion price of the greater of 95% of the lowest daily VWAP for each of the five trading days immediately preceding the conversion date and $4.25, subject to adjustment as set forth in the governing documents. Sales to the Investors under the Facility are subject to a beneficial ownership cap of 4.99% of the Company’s outstanding common stock at any one time, and a 19.99% blocker provision to comply with NASDAQ Listing Rules, along with other restrictions and conditions outlined in the definitive documents. The preferred stock is subject to redemption by the Company, for cash, in lieu of conversion, upon the occurrence of certain events.

“We are pleased to announce this facility which will provide capital to further the development of our Ellendale HPC Campus,” said Wes Cummins, Chief Executive Officer of Applied Digital. “This facility gives us flexibility to access capital that will be used to progress the build-out of our second data center while nearing completion on the construction on our first data center on that campus.”

Northland Capital Markets acted as Sole Placement Agent to the Company. Lowenstein Sandler LLP acted as legal counsel to the Company. Ellenoff Grossman & Schole acted as legal counsel to the Investors.

The securities described above (including any securities issuable pursuant to the conversion provisions of the preferred stock) have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The Company has agreed to file one or more resale registration statements with the Securities and Exchange Commission for purposes of registering the resale of the shares of common stock issuable upon conversion of the preferred stock issued under the Facility.

About Applied Digital

Applied Digital (Nasdaq: APLD) develops, builds and operates next-generation data centers and cloud infrastructure. Different by design, the Company’s purpose-built facilities are engineered to unleash the power of accelerated compute and deliver secure, scalable and sustainable digital hosting, along with turnkey CSaaS and GPU-as-a-Service solutions. Backed by deep hyperscale expertise and a robust pipeline of available power, Applied Digital accommodates AI Factories and beyond to support the world’s most exacting AI/ML, blockchain and high-performance computing (HPC) workloads.

Forward-Looking Statements

This press release contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 regarding, among other things, future operating and financial performance, product development, market position, business strategy and objectives and future financing plans. These statements use words, and variations of words, such as “will,” “continue,” “build,” “future,” “increase,” “drive,” “believe,” “look,” “ahead,” “confident,” “deliver,” “outlook,” “expect,” “project” and “predict.” Other examples of forward-looking statements may include, but are not limited to, (i) statements of Company plans and objectives, including our evolving business model, or estimates or predictions of actions by suppliers, (ii) statements of future economic performance, (iii) statements of assumptions underlying other statements and statements about the Company or its business, (iv) the Company’s ability to effectively apply the net proceeds from the transaction as described above, and (v) the Company’s plans to obtain future project financing. You are cautioned not to rely on these forward-looking statements. These statements are based on current expectations of future events and thus are inherently subject to uncertainty. If underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from the Company’s expectations and projections. These risks, uncertainties, and other factors include: our ability to complete construction of the Ellendale HPC data center; our ability to complete the negotiation and execution of the definitive transaction documents required to close the Macquarie Asset Management facility; our ability to raise additional capital to fund the ongoing data center construction and operations; our dependence on principal customers, including our ability to execute leases with key customers, including leases for our Ellendale HPC Campus; our ability to timely and successfully build new hosting facilities with the appropriate contractual margins and efficiencies; power or other supply disruptions and equipment failures; the inability to comply with regulations, developments and changes in regulations; cash flow and access to capital; availability of financing to continue to grow our business; decline in demand for our products and services; maintenance of third party relationships; and conditions in the debt and equity capital markets. Information in this release is as of the dates and time periods indicated herein, and the Company does not undertake to update any of the information contained in these materials, except as required by law.

Investor Relations Contacts
Matt Glover or Ralf Esper
Gateway Group, Inc.
(949) 574-3860
APLD@gateway-grp.com

Media Contact
Buffy Harakidas, EVP and Jo Albers
JSA (Jaymie Scotto & Associates)
jsa_applied@jsa.net
(856) 264-7827

FAQ

How much is Applied Digital's (APLD) new convertible preferred equity facility worth?

Applied Digital secured a $150 million convertible preferred equity facility with institutional investors, available over 36 months in $25 million increments at the company's discretion.

What is the conversion price for APLD's 2025 preferred stock facility?

The conversion price is the greater of 95% of the lowest daily VWAP over five trading days before conversion or $4.25 per share, with conversion available 45 days after first issuance or upon SEC registration effectiveness.

How will Applied Digital (APLD) use the $150M facility proceeds?

Applied Digital plans to use the proceeds to fund the development of their Ellendale HPC Campus and for general corporate purposes, specifically focusing on building their second data center while completing their first.

What are the key terms of APLD's April 2025 convertible preferred stock?

The preferred stock has a $1,000 per share stated value, no preferred dividends, a 4% original issue discount, and includes ownership caps of 4.99% and 19.99% to comply with NASDAQ rules.

Is Applied Digital required to use the full $150M convertible facility?

No, Applied Digital has no obligation to use any of the $150 million facility. The company maintains full control over timing and amount of sales, with no minimum commitments or penalties for non-use.