Fermi Inc. (NASDAQ:FRMI) saw its shares slide 18.2% over the five sessions ending Friday, July 12, closing at $6.59—a 10% decline on the day. The sharp selloff followed the pricing of an upsized $375 million convertible bond offering, which brought the company's total debt load into sharp focus. In contrast, the S&P 500 gained 1.2% over the same period, underscoring that the weakness was company-specific rather than a broader retreat from artificial-intelligence infrastructure plays.
Liquidity Squeeze and Debt Details
A July 9 regulatory filing revealed that Fermi held just $92.0 million in cash and cash equivalents as of June 30, of which $29.2 million was restricted for specific uses, leaving only $62.8 million unrestricted. That marked a 70% plunge from the $207.5 million unrestricted balance reported at the end of the first quarter. The filing also listed equipment borrowings of $536.9 million.
The five-year convertible notes carry a 5% coupon and an initial conversion price of approximately $9.52 per share. Convertible notes are debt instruments that can be exchanged for stock under predetermined conditions. To mitigate dilution, Fermi allocated $30 million to a capped-call hedge, which protects against share dilution up to $14.64 per share but offers no protection beyond that level.
Proceeds and Pro Forma Liquidity
After deducting estimated fees and the cost of the capped-call hedge, the offering is expected to generate net proceeds of about $332.3 million. Combined with the implied June 30 unrestricted cash balance, that would provide roughly $395.1 million before any subsequent spending. For context, Fermi invested $441 million in project property and equipment during the first quarter alone, though the company has indicated that future capital deployment will be more closely tied to commercial milestones.
At the initial conversion rate, the notes are equivalent to 39.4 million shares, representing about 6.3% of the 629.8 million shares outstanding as of March 31. However, Fermi may settle conversions in cash, stock, or a combination, so actual dilution is not automatic. The conversion price of $9.52 sits about 44% above Friday's closing price, making interest and leverage the more immediate costs.
Market Context and Peer Performance
The relative underperformance was stark. Applied Digital (NASDAQ:APLD), another listed data-center infrastructure developer, lost 5.8% between July 2 and July 10, while power-and-computing operator TeraWulf (NASDAQ:WULF) gained 3.7%. Fermi's 18.2% decline far exceeded both. Friday's trading volume of 72.5 million shares was roughly four times the recent daily average of 18.1 million, indicating that the repricing was driven by significant investor conviction rather than thin liquidity.
Commercial Progress and Risks
According to the offering memorandum, Fermi has held preliminary discussions with seven potential tenants and 12 potential joint-venture partners, with more advanced talks underway with a smaller group. The company also noted that discussions with a potential chief executive are advanced. However, it warned that any tenant or partner transaction could require the issuance of a material amount of new equity.
Fermi had not generated any operating revenue through March 31. Its ground lease requires a definitive lease with a Phase 1 tenant for at least 200 megawatts before it can receive a notice to proceed with vertical data-center construction. A delayed tenant signing or another heavy spending quarter could force additional financing and potential dilution, while a binding lease or funded partner could ease that pressure.
Upcoming Milestones
The bond sale is scheduled to close on Tuesday, July 14. Buyers have an option to add another $56.25 million within 13 days of issuance. Full exercise would lift the total notes to $431.25 million and the initial share equivalent to about 45.3 million shares, or 7.2% of the March share count. The next key test for Fermi will be whether the added financing runway can secure a signed customer before construction spending once again tightens liquidity.
