Aug. 23 at 10:35 PM
Input from Gemini
The immediate drop in
$WULF stock price following its
$1 billion convertible debt offering is a short-term effect caused by convertible hedging. This strategy is used by the institutional investors who buy the convertible notes. To neutralize their risk, they immediately short sell a large amount of TeraWulf's common stock, which creates a sudden and concentrated selling pressure on the market.
This temporary imbalance in supply and demand pushes the stock price down. The effect is amplified by capped call transactions that TeraWulf entered into, which also require financial institutions to hedge their own exposure. While this initial, powerful wave of selling is significant, it's a one-time event. Going forward, any additional hedging activity is far less impactful. The stock's long-term value will ultimately depend on how TeraWulf uses the new capital to grow its business and financial performance.
