The share price boom of artificial intelligence (AI) and high-performance computing (HPC) companies since September has generated extraordinary returns for bitcoin miners expanding into those industries, but the growth comes at a cost.
bitcoin is up just 10% this year, and with the bubble bursting in corporate bitcoin treasuries in recent months, the narrative has shifted to miners transforming their business models. Miners have been increasingly active in debt markets as they seek to finance ambitious expansions of their AI and HPC businesses.
According to The MinerMag, their combined debt and convertible note offerings reached record levels in the third quarter with estimates reaching $6 billion. That increases the risk of default, and investors will now focus on seeing significant revenue generation from the pivot.
TerraWulf (WULF), MARA Holdings (MARA), and Cipher (CIFR) together raised billions through convertible bonds during the quarter, while CleanSpark (CLSK) tapped into credit facilities to shore up its balance sheets.
The momentum has continued into the final quarter. TerraWulf launched a private placement of $3.2 billion in senior secured notes, reportedly the largest single offering ever by a public miner, according to The MinerMag. Shortly after, IREN (IREN) issued a $1 billion convertible bond and Bitfarms (BITF) announced a $300 million convertible bond.
Some of these instruments, such as the IREN, have a zero coupon structure. Others, like TerraWulf’s latest issue, have higher costs, with a 7.75% coupon that translates into an annual interest expense of approximately $250 million. This far exceeds the company’s 2024 revenue, which amounted to just $140 million, according to The Miner Mag.
Is this time different?
During the 2022 bear market, when the price of hash collapsed as bitcoin fell 70%, lenders seized machines that had been used as collateral for loans, a technique seen when Core Scientific (CORZ) filed for Chapter 11 bankruptcy.
MinerMag suggests that the AI-HPC approach uniquely differentiates the current debt-driven fundraising cycle. By seeking diversified income, the miner can reduce risks.
The market is rewarding higher valuations for miners who transition from bitcoin-only operations to AI/HPC businesses. While convertible bonds still result in dilution for shareholders, the shift is also attracting a new investor base.
The CoinShares Bitcoin Mining ETF (WGMI), often seen as a proxy for the broader bitcoin mining sector, is up 160% so far this year.
