Super Micro Computer (NASDAQ:SMCI) is tapping the debt markets and Wall Street isn’t loving it. The stock slid 5.44% by late morning after the company announced it plans to raise $2 billion through convertible senior notes due 2030, with the potential to tack on another $300 million if demand’s there. The notes are being offered exclusively to qualified institutional buyers and can convert into stock or cash under certain conditions. As part of the plan, Supermicro is also buying back up to $200 million of its own shares in private deals alongside the offering.
To soften the dilution blow, Supermicro is entering into capped call transactions a move designed to minimize the share impact if the notes are eventually converted. That said, it’s a complex strategy that comes with a twist: the financial institutions hedging these transactions will be buying or selling SMCI stock and derivatives in the market. That could create unusual volatility, especially during conversion windows, as these hedges shift. Investors may be bracing for that rollercoaster.
The rest of the proceeds? They’re going toward working capital and expansion a bullish signal that the company’s still betting on growth. But the timing and structure of this deal are what’s getting attention. When a fast-growing AI infrastructure player like SMCI chooses to raise billions through convertibles rather than traditional equity or loans, the market starts asking questions. Will it fuel long-term upside, or trigger short-term dilution and stock pressure? That’s the bet on the table.
This article first appeared on GuruFocus.
