Semler Scientific tumbles after releasing $75M convertible note offering and fourth-quarter earnings

Semler Scientific (SMLR) stock prices plummeted 15% after the close of U.S. stock market trading on Thursday. SMLR shares tumbled after it announced plans to offer $75 million of convertible senior notes and use some of the funds to add to its Bitcoin holdings.

The company estimated the net profits from the offering to be approximately $81.4 million after deducting the initial purchaser’s discount and expenses. Semler Scientific will also use $6.6 million of the net proceeds from the offering to pay the cost of the capped Call transactions.

SMLR plummets after releasing fourth-quarter 2024 earnings

Semler Scientific shares tumbled as low as $51 as the firm disclosed fourth-quarter earnings rose 3.3% to $12.5 million. The company’s income from operations increased by 8.8% to $3.7 million. Unrealized gains from the change in fair value of the company’s bitcoin holdings reached $29 million.

“We are pleased to report these preliminary unaudited numbers and significant unrealized gain from our bitcoin holdings. We are excited to continue executing on our bitcoin treasury strategy.”

– Doug Murphy-Chutorian, CEO of Semler Scientific

As of January 17, the company held 2,321 bitcoins, which were acquired for $191.9 million at an average price of $82,689 per bitcoin. Semler Scientific revealed it will report full financial results for the fourth quarter and provide an update on Bitcoin holdings on February 18.

Semler Scientific adds $10M private offering of convertible senior notes

Semler Scientific revealed today that it will offer $85 million of 4.25% convertible senior notes in a private offering. The firm increased the offering size from the previously announced $75 million notes. Strong demand for the notes in the market led to an increase of $10 million in total notes raised. The senior notes will be due by 2030 and offered to people qualified as institutional buyers under Rule 144A under the Securities Act of 1933.

Initial purchasers of the notes will also be granted an option to purchase an additional $15 million principal amount of notes during a 13-day period from the date the notes were issued. The firm also revealed that the sale of the notes will close on January 28, subject to the satisfaction of customary closing conditions.

The notes will accrue interest payable semiannually in arrears on February 1 and August of each year at a rate of 4.25% per year. The offering will be subject to market and other conditions, and the firm said there can be no assurance as to when it will be completed.

The notes’ initial conversion rate will be 13.0826 shares of Semler Scientific’s common stock, equivalent to an initial conversion price of ~$76.44 per share. This represents a premium of around 25% over yesterday’s reported sale price.

Semler Scientific said it may not redeem the notes prior to August 2, 2028, but may redeem all or any portion of the notes for cash. The firm highlighted that a portion of the proceeds from the note sale will be used to fund capped call transactions to balance stock dilution from any potential note conversion. The remainder of the proceeds will also include an option for another $15 million. The cap price of the capped call transactions of the notes will initially be $107.01, which represents 75% over yesterday’s reported sale price of Semler Scientific’s stock.

The capped call transactions are expected to cover the number of shares of Semler Scientific common stocks that will initially underlie the notes. Semler Scientific will also add capped call transactions to initial purchasers who want to buy additional notes.

The company also revealed that it expected the purchase of call transactions would increase or decrease the market price of Semler Scientific’s common stock. In this case, the company’s share price declined by 15% after offering senior notes.

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