Nebius plunges 12.6% on $3.75B convertible notes offering
AI infrastructure firm's debt raising sparks dilution concerns despite recent partnerships with Meta and Nvidia
Nebius Group shares tumbled 12.6% on Tuesday after the artificial intelligence infrastructure provider announced plans to raise $3.75 billion through a private offering of convertible senior notes, triggering investor concerns about dilution and leverage.
The stock fell $16.40 to $113.45, giving the Amsterdam-based company a market capitalization of approximately $28.6 billion. The shares gapped down sharply before the market opened and continued to slide throughout the session, extending a volatile period for the high-flying AI infrastructure stock.
Nebius disclosed late Monday that it would offer $3.75 billion in convertible senior notes through a private placement to qualified institutional buyers under Rule 144A of the Securities Act. The offering is split into two series: $2.0 billion in notes due March 15, 2031, and $1.75 billion maturing March 15, 2033.
The company plans to use the proceeds to fund data center construction and AI cloud infrastructure development, as well as expand its data center footprint and procure graphics processing units (GPUs). Nebius will also grant the initial purchaser an option to buy up to an additional $300 million of the 2031 notes and $262.5 million of the 2033 notes within 13 days of issuance, potentially increasing the total offering size.
Investors punished the stock despite Nebius's recent string of high-profile partnerships, including a reported $27 billion infrastructure agreement with Meta and a $2 billion investment from Nvidia. The company also announced a partnership with Nvidia to launch the Enterprise Readiness Initiative, designed to help AI startups scale for enterprise clients.
The negative market reaction underscores growing investor sensitivity to dilution risks in the AI infrastructure sector. The notes will accrete to 120% of their original principal amount by their respective maturity dates, and noteholders will have the right to convert their holdings under certain circumstances. Nebius will settle conversions by paying cash, delivering Class A ordinary shares, or a combination of both at the company's election.
Nebius cannot redeem the 2031 notes before March 20, 2029, or the 2033 notes before March 20, 2030, except in cases of certain tax law changes. After those dates, the company may redeem the notes if its Class A share price reaches 130% of the conversion price for a specified period.
The financing comes as Nebius aggressively expands its infrastructure footprint to meet surging demand for AI computing resources. The company reported revenue of $529.8 million over the trailing twelve months, with quarterly revenue growing 5.1% year-over-year. However, the company operates with negative operating margins of -1.03% and negative EBITDA of $192.2 million.
Despite Tuesday's sell-off, analysts remain broadly bullish on Nebius. The stock carries an average price target of $154.73, according to market data, suggesting significant upside from current levels. Nine analysts rate the shares a buy or strong buy, while two recommend hold and one maintains a sell rating.
Nebius's valuation metrics reflect the premium investors have been willing to pay for AI infrastructure exposure. The stock trades at a price-to-sales ratio of 53.94 and a price-to-book ratio of 6.19, with a trailing price-to-earnings ratio of 1,026.82. Those elevated multiples have made the stock particularly sensitive to news that could impact earnings per share or ownership structure.
The convertible notes offering marks the latest twist in Nebius's transformation from a Dutch telecom holding company into a pure-play AI infrastructure provider. The company completed a strategic pivot in 2024, shedding legacy assets to focus exclusively on cloud computing and AI data center services.
Tuesday's decline pushes Nebius shares further below their 52-week high of $141.10 set earlier this year, though the stock remains well above its 52-week low of $18.31. The stock is currently trading above both its 50-day moving average of $96.43 and its 200-day moving average of $84.45, suggesting the long-term uptrend remains intact despite the recent volatility.
Institutional investors own 48.47% of Nebius shares, which could provide some support as major shareholders evaluate the dilution impact of the convertible notes offering. The notes are senior, unsecured obligations of the company and will be issued under indentures with U.S. Bank Trust Company, National Association, as trustee, bearing interest payable semi-annually in arrears.