Bitcoin Miners have been quick to utilize Convertible Notes as a lever to raise capital achieving over $5 Billion, in the past 6 months alone, now that the rates available are extremely competitive.  Marathon Digital (MARA) recently raised $2 Billion alone (providing investors use the option to purchase an additional $150 million aggregate principal amount of the notes), Riot Platforms (RIOT) with $594.4 million, Core Scientific (CORZ) with $550 million and TeraWulf (WULF) with $500 million to highlight a few of the larger notes processed. 

In a bold financial maneuver, CleanSpark (CLSK), a leader in sustainable Bitcoin mining, has just secured a $650 million senior convertible note, fully exercised at a 0% coupon rate. This strategic decision bolsters the company’s growth trajectory while minimizing shareholder dilution, offering a compelling case for investors and stakeholders alike.  

CleanSpark, unlike many of its peer miners, has decided not to follow the playbook, initiated by Michael Saylor, the founder and Executive Chairman of MicroStrategy (MSTR), and use the proceeds to purchase Bitcoin, subsequently used by the likes of Marathon Digital and Riot Platforms, who have both bolstered their Bitcoin treasury holdings, in recent weeks.  Instead, the company is looking to grow hash rate organically and continue to produce Bitcoin at one of the lowest costs in the industry.  

Understanding the Convertible Note Structure

At the heart of this financing is the note’s strike price of $14.80, which represents a 20% premium over CleanSpark's recent closing share price of $12.33. This premium reflects investor confidence in the company's future performance, as it sets a conversion price of $24.66. Notably, this structure allows for 100% conversion without immediate dilution of existing shares, providing a protective buffer for current shareholders until the stock price reaches the set threshold.

Cap Call Purchase: A Strategic Hedge

In conjunction with the convertible note, CleanSpark has purchased a Cap Call using the proceeds. This financial instrument serves as a hedge against potential stock price increases, effectively capping the company's obligations at $24.66 per share while providing the flexibility to capitalize on rising market conditions. This approach not only safeguards the company’s financial position but also enhances its ability to navigate market volatility.

A Robust Investment Framework

The $650 million convertible note is also complemented by a substantial $145 million stock buyback initiative repurchasing 11.76 million shares of Common Stock, which further strengthens CleanSpark's position. This buyback plan, will mean the Company will not have to issue any additional shares (on a net basis, after accounting for the benefits of the capped call and the share repurchase), until the price of its Common Stock exceeds $33.67 (+170%), demonstrating the company’s commitment to enhancing shareholder value while optimizing its capital structure. Such measures indicate a robust investment framework that prioritizes sustainable growth and encourages long-term investor confidence.

Lender Confidence and Institutional Backing

The recent financing round, led by Cantor Fitzgerald has garnered significant interest, with 28 out of 30 institutional investors choosing to subscribe to the deal. This overwhelming institutional backing underscores the confidence that sophisticated investors have in CleanSpark’s business model and future prospects. Given the unique nature of the Bitcoin mining industry, still effectively in its infancy, this level of support is a testament to the company’s operational integrity and strategic vision.

Downside Protection for Noteholders

Investors in the convertible note enjoy a distinct advantage: they are positioned above shareholders in the capital structure. In the event of adverse developments, noteholders are afforded greater security and downside protection. This structure mitigates risk, making the investment attractive to those wary of the inherent volatility in the Bitcoin sector.  It should be noted that the company has 9,297 Bitcoin held in treasury, with a current valuation approaching $1 Billion, which could also be used should the need to pay out noteholders in cash is required.  

CleanSpark's Growth Potential

CleanSpark’s operational prowess in Bitcoin mining is another critical factor driving interest in the convertible note. The company has demonstrated an efficient production capacity, mining Bitcoin with a fleet efficiency of just 19.05 j/TH, second only to IREN (IREN) and at an average cost of $36,250.  Their hash rate growth in 2025 that will see them achieve 50 EH/s for a further investment of $163 million. As the demand for Bitcoin continues to rise, CleanSpark’s ability to produce this digital currency at a competitive cost positions it favorably in a burgeoning market.

Future Opportunities

With $400 million earmarked for investment in furthering its operations, CleanSpark is strategically positioned to capitalize on growth opportunities in the Bitcoin landscape. This funding will enable the company to expand its mining capabilities, invest in technology, and enhance operational efficiency, all of which are crucial for maintaining a competitive edge in the fast-evolving digital currency sector.

CleanSpark have made it very clear that they are not considering utilizing their power for High Performance Computing (HPC), unlike many of their peer miners, but intend to become one of the largest Bitcoin miners in the the industry.  Zach Bradford, Chief Executive Officer (CEO) of CleanSpark, believes only the miners that have the ability to continually raise significant capital will be able to survive, with the numbers of miners in the next few years effectively reducing to 6 or 7 larger miners, thereby ensuring CleanSpark remains part of that group of larger miners. 

Conclusion

In summary, CleanSpark’s recent $650 million convertible note represents not just a financing strategy but a forward-thinking approach to sustainable growth. By effectively leveraging convertible securities and implementing strategic buyback plans, the company will enhance shareholder value while minimizing dilution. With robust institutional support and a clear path for future investments, CleanSpark provides an opportunity in the rapidly evolving world of Bitcoin. For those investors seeking exposure to the digital currency market, CleanSpark offers a compelling proposition that balances risk and reward in an increasingly dynamic landscape.