Keel Infrastructure Corp. shares experienced a sharp decline on Friday, falling roughly 12% in early trading on the Nasdaq. The drop came after the company announced the pricing of an upsized $400 million convertible senior note offering, a move that has heightened concerns among investors regarding potential dilution.
The offering, originally planned at $350 million, was increased to $400 million, with an option for buyers to purchase an additional $58 million. This financing is intended to provide Keel with capital to accelerate its transition from bitcoin mining to building infrastructure for artificial intelligence and high-performance computing (HPC).
Keel's stock opened at $5.22, marking a 12% decline from the previous close. The shares traded within a range of $5.19 to $5.44, with volume reaching 11.55 million shares. The company's market capitalization stands at approximately $3.14 billion, according to Google Finance.
The convertible notes carry an annual interest rate of 1.25% and mature on January 15, 2032. The initial conversion price is set at approximately $7.41 per share, representing a 25% premium over Thursday's closing price of $5.93. A portion of the proceeds will be used for capped call transactions, which are options designed to mitigate dilution in the event of share issuance. The initial cap price for these calls is $11.86 per share, as reported by Benzinga. The remaining funds will be allocated to general corporate purposes, including data-center projects, equipment deposits, and letters of credit.
This financing comes less than a month after Keel reported a strong liquidity position of $533 million as of May 8. CFO Jonathan Mir had previously stated that the company's liquidity fully funds its Panther Creek, Sharon, and Moses Lake projects through lease execution, construction at Moses Lake, and corporate costs through 2028. The contrast between these recent liquidity claims and the new note sale has fueled investor skepticism.
While the additional low-coupon debt provides Keel with some financial flexibility to manage relationships with customers and suppliers, common shareholders are now grappling with the risk of further share issuance before the new data-center business generates meaningful revenue. The company's pivot from bitcoin mining to AI infrastructure remains unproven at scale, adding to the uncertainty.
The competitive landscape is intensifying. IREN announced plans this week for an 800-megawatt data-center campus in South Australia. Meanwhile, Bernstein has raised its price targets for Riot Platforms and Core Scientific, incorporating AI infrastructure into its valuation models, according to Investor's Business Daily.
Broader market conditions also weighed on sentiment. The S&P 500 and Nasdaq were in negative territory at the open on Friday, following a stronger-than-expected jobs report that reignited fears of prolonged tight monetary policy from the Federal Reserve. The Nasdaq Composite slid 1.10% at the open.
Beyond the immediate dilution concerns, Keel faces several other risks, including its short operating history, the challenges of transitioning from bitcoin mining to HPC, reliance on cheap power, potential project delays or cost overruns, competition for data-center sites, and the need for additional capital. Missed lease agreements, higher power costs, or the failure of capped calls to fully offset dilution could continue to pressure the stock, even if AI demand remains robust.
