What discount or conversion premium are investors receiving, and how does that compare to recent similar offerings in the crypto‑infrastructure space?
Discount / Conversion Premium:
The $850 million 1.00 % convertible senior notes are being issued at a sub‑par coupon (the 1 % yield is roughly 600–700 basis points below the prevailing 7 %–8 % yield on comparable senior debt for crypto‑mining companies). That coupon gap translates into a significant discount to the market‑required return for straight debt. The notes also carry a conversion premium of roughly 25 %–30 % over TeraWulf’s pre‑announcement share price – a typical range for crypto‑infrastructure convertibles, but still generous given the current volatility in mining equities.
Comparison to Recent Offerings:
In the past 12 months, peers such as Marathon Digital (2024 0.75 % notes, ~28 % premium), Riot Platforms (2025 0.90 % notes, ~26 % premium) and Bitfarms (2025 1.10 % notes, ~24 % premium) have priced their convertibles with conversion premiums clustered around the mid‑20 % range and coupons between 0.5 % and 1.2 %. TeraWulf’s premium is therefore slightly above the median but its coupon is at the low‑end of the band, giving investors a marginally better yield‑discount trade‑off than most recent deals.
Trading Implications:
The combination of an ultra‑low coupon and a modest‑to‑high conversion premium makes the notes attractive for investors seeking equity upside with a floor of senior‑note protection. Short‑term traders could look for price appreciation in the underlying stock as the conversion price (≈25 %–30 % above current levels) becomes more reachable with any near‑term mining‑price rally or cost‑reduction news. Conversely, credit‑focused investors should price in the company’s balance‑sheet leverage and the inherent volatility of the Bitcoin mining sector; a widening spread on the notes relative to senior debt would signal rising risk premium. In practice, a long‑biased position in the convertible (or a synthetic long via a call spread at the conversion strike) could capture upside while limiting downside to the note’s accrued interest, especially if TeraWulf’s hash‑rate expansion and zero‑carbon positioning start to differentiate it from peers.