IREN Announces $875 Million Convertible Notes Offering, Stock Declines 4.2%

Executive Summary

Iris Energy (IREN), a Bitcoin mining and high-performance computing (HPC) data center operator, saw its stock decline by 4.2% in after-hours trading following the announcement of an $875 million private offering of convertible senior notes. The offering, which could extend to $1 billion if initial purchasers exercise their option for an additional $125 million, is intended to fund general corporate operations, including capital expenditures, and mitigate potential share dilution through capped call transactions.

The Event in Detail

IREN announced a private offering of $875 million aggregate principal amount of convertible senior notes due 2031. These notes are unsecured obligations and will mature on July 1, 2031, unless earlier repurchased, redeemed, or converted. Interest will be payable semi-annually. Noteholders will possess conversion rights under specified conditions, allowing IREN the flexibility to settle conversions in cash, ordinary shares, or a combination thereof. The initial conversion rate is set at 73.3229 ordinary shares per $1,000 principal amount of notes, corresponding to an initial conversion price of approximately $13.64 per ordinary share. This conversion price represents a premium of approximately 30% over the last reported sale price of $10.49 per share as of June 10, 2025.

The company has also entered into capped call transactions, which are expected to provide a hedge against conversions up to an initial cap price of $20.98 per share, representing a 100% premium. Furthermore, IREN engaged in a prepaid forward share purchase transaction to acquire approximately $92.5 million of its ordinary shares, aimed at facilitating derivative transactions for investors hedging their note investments.

Market Implications

The immediate market reaction to the announcement was a 4.2% decline in IREN's stock price. This short-term negative sentiment often accompanies convertible debt offerings due to concerns over potential future share dilution. However, the strategic allocation of proceeds, particularly towards capped call transactions, explicitly aims to manage this dilution. The capital raise is also pivotal for IREN's expansion into the high-performance computing and artificial intelligence (AI) sectors. The company has secured new multi-year cloud service contracts for NVIDIA Blackwell GPU deployments, projecting an annualized run-rate revenue of over $500 million from approximately 23,000 GPUs by late 2025. This move aligns IREN with a growing trend among Bitcoin miners to diversify revenue streams beyond pure crypto mining, leveraging existing energy infrastructure for AI workloads. Other companies, such as Coinbase, have similarly utilized convertible senior notes, with Coinbase announcing a $2 billion private offering of such notes to support corporate purposes including acquisitions and capped call transactions.

Broader Context

IREN's convertible notes offering and strategic pivot towards AI/HPC reflect a significant shift within the Bitcoin mining industry. Following the Bitcoin halving, which reduced block rewards, many large operators are seeking alternative revenue sources and financial stabilization. Leasing energy footprints for AI and HPC clients has emerged as a key strategy. This model is evidenced by Cipher Mining's 10-year, $3 billion agreement with Fluidstack, partially financed by Google, and TeraWulf's hosting agreements for over 200 megawatts dedicated to AI workloads, estimated to be worth over $3.7 billion. These long-dated contracts introduce a new risk profile for miner equities, offering stable, dollar-denominated payments that can reduce exposure to Bitcoin price volatility. The ability to secure capital through instruments like convertible notes, collateralized by multi-year AI contracts, allows for infrastructure expansion in diverse market conditions, moving beyond the traditional reliance on bull market financing. This suggests a future where miner equities may evolve into hybrid firms, combining commodity-linked income with contracted service revenue, rather than being solely high-beta proxies for Bitcoin prices. The shift may also influence the growth rate of the overall Bitcoin network hash rate if more capacity is redirected to external hosting.