TLDR
- Super Micro Computer announced a $2 billion convertible senior notes offering due in 2030, exclusively for qualified institutional investors
- The convertible notes carry a conversion price of approximately $55.20 per share, representing a 35% premium to current stock price
- Company plans to use proceeds for working capital, $200 million for stock repurchases, and general corporate purposes
- Stock dropped 9.77% on Monday, making it the worst performer in the S&P 500 that day
- The offering includes an option for initial purchasers to buy additional $300 million in notes within 13 days
Super Micro Computer dropped nearly 10% on Monday after announcing plans to raise $2 billion through convertible senior notes. The server maker’s stock fell 9.77% to $42.31, making it the day’s worst performer in the S&P 500.
The convertible notes mature on June 15, 2030, and will be offered exclusively to qualified institutional buyers. Initial purchasers can buy up to an additional $300 million in notes within 13 days of the first issue.
The notes come with an initial conversion rate of 18.1154 shares per $1,000 principal value. This equals a conversion price of roughly $55.20 per share, which represents a 35% premium over the June 23 closing price of $40.89.
$SMCI Supermicro Announces Pricing of Private Offering of $2.0 Billion of Convertible Senior Notes Due 2030:https://t.co/tqwcwea9tZ pic.twitter.com/v9vcBPYwkc
— SEC Filing Tracker (@FilingTracker) June 24, 2025
Super Micro expects net proceeds of around $1.96 billion from the offering. If the additional notes option gets exercised, proceeds could reach approximately $2.26 billion.
The company has earmarked specific uses for the funds. About $158.4 million will go toward capped call transactions designed to reduce potential dilution from the convertible notes. Another $200 million is set aside for stock repurchases.
Financial Performance and Market Position
Super Micro’s recent financial results show mixed performance. The company reported fiscal Q3 revenue of $4.6 billion, up 19% year-over-year but down 19% quarter-over-quarter. Non-GAAP earnings per share came in at $0.31, down from $0.66 in the prior year.
The company’s gross margin compressed to 9.7% in Q3, falling from 11.9% in the previous quarter. This decline stemmed from higher inventory reserves and lower volume. Super Micro ended Q3 with $3.9 billion in inventory, up 7.6% quarter-over-quarter.
Despite revenue challenges, the company generated $627 million in cash flow from operations during Q3. Free cash flow reached $594 million for the quarter. Super Micro improved its net cash position to $44 million, up from a negative $479 million in the prior quarter.
For Q4, management expects revenue between $5.6 billion and $6.4 billion. Non-GAAP earnings per share guidance ranges from $0.40 to $0.50.
Stock Performance and Analyst Views
Super Micro stock remains up 47% year-to-date despite Monday’s decline. However, shares have dropped 49% over the past 12 months due to accounting concerns and uneven quarterly results.
The company avoided Nasdaq delisting in February but continues to face reputational challenges. Raymond James analysts noted that valuation has been hurt by “lumpy performance and reputational risk.”
Wall Street analysts maintain a Hold rating with an average price target of $40.21. Estimates range from a high of $70.00 to a low of $15.00 across 14 analysts. The average target implies a slight downside from current levels.
GuruFocus estimates a fair value of $68.35 for Super Micro, suggesting potential upside of 67% from current prices. This valuation reflects historical trading multiples and future business performance estimates.
Shares had gained momentum earlier this month following strong AI revenue results from Broadcom. The semiconductor company’s fiscal second-quarter earnings provided an encouraging sign for AI-related stocks like Super Micro.
The convertible notes offering comes as Super Micro expands globally with new facilities in Malaysia, Taiwan, and Europe. The company is also launching its Data Center Building Block Solution to reduce power consumption and optimize space.
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