IREN Ltd. experienced a sharp decline in premarket trading on Monday, with shares falling 9.43% to $55.43 following the announcement of a proposed $2 billion convertible note sale. The move comes just days after the company revealed a strategic partnership with Nvidia, which secured an option to purchase up to 30 million IREN shares at $70 each over a five-year period.
The convertible notes, set to mature on December 1, 2033, include an option for initial investors to purchase an additional $300 million. The interest rate, conversion rate, and other terms will be determined at pricing. IREN plans to use part of the proceeds for capped-call transactions to mitigate dilution, while the remainder will fund working capital and general corporate needs. However, the company cautioned that dilution could still occur if share prices exceed the cap price, and there is no guarantee the deal will close on the proposed terms.
The financing follows a challenging fiscal third quarter. IREN reported revenue of $144.8 million, down from $184.7 million in the previous quarter, while its net loss widened to $247.8 million from $155.4 million. The decline was attributed to weaker Bitcoin prices and retired mining hardware. AI cloud revenue grew to $33.6 million from $17.3 million, but Bitcoin mining revenue slipped to $111.2 million from $167.4 million, highlighting the company's strategic shift from mining to AI-focused infrastructure.
IREN recently inked a $3.4 billion, five-year AI cloud deal with Nvidia, under which it will deliver managed GPU cloud services using Blackwell systems from its Childress, Texas campus. Co-founder and Co-CEO Daniel Roberts noted that the world is "structurally short compute," emphasizing the company's transition from Bitcoin mining rigs to GPU infrastructure for AI workloads.
Analyst opinions on IREN remain divided. J.P. Morgan's Reginald Smith raised his price target to $46 from $39 but maintained a Sell rating. Needham's John Todaro kept a Hold rating as of May 8. On the bullish side, H.C. Wainwright's Mike Colonnese and Bernstein's Gautam Chhugani retained price targets of $85 and $100, respectively. Cantor Fitzgerald's Brett Knoblauch increased his target to $77 from $61, citing the Nvidia tie-up, the $3.4 billion cloud agreement, and new Spanish capacity as key catalysts. He also highlighted IREN's Microsoft cloud contract, suggesting the company is increasingly viewed as an AI infrastructure play rather than a mining stock.
Competition in the AI data center space is intensifying. Last week, Hut 8 announced a massive 15-year, $9.8 billion AI data center lease in Texas, underscoring the race among former mining and power companies to secure tenants, electricity, and Nvidia-based designs.
The market's focus has shifted from the Nvidia partnership to IREN's ability to finance its ambitious projects. If the company successfully prices the debt and converts its Nvidia and Microsoft deals into reliable income, Monday's drop may be a temporary reaction to financing pressure. However, unfavorable terms, rising construction costs, or weaker AI cloud demand could turn the offering into a warning sign that the transition is proving more expensive than anticipated.
