Semler Scientific Tumbles After Market Close on Convertible Note Offering, Earnings

The analyst who wrote this piece owns shares of Semler Scientific (SMLR). Medical-devices maker Semler Scientific (SMLR) tumbled as much as 15% after the close of U.S. trading on Thursday after saying it plans to sell $75 million of convertible senior notes and will use some of the funds to add to its bitcoin (BTC) holdings.

The shares dropped as low as $51 and were recently indicated 8% lower in pre-market trading. The Santa Clara, Calif.-based company increased the offering size to $85 million with an additional $15 million option available. The notes, which expire in 2030, carry a 4.25% annual interest rate.

Semler set an initial conversion price of $76.44, representing a 2% premium over the stock's closing price Thursday. The notes are redeemable after August 2028, provided the stock price reaches 130% of the conversion price.

Of the proceeds, $6.6 million will fund capped-call transactions that will limit existing investors' equity dilution, and the rest will go towards bitcoin acquisitions and general corporate purposes.

Fourth-quarter revenue rose 3.3% to $12.5 million and income from operations added 8.8% to $3.7 million, the company said. The unrealized gain from the change in fair value of bitcoin holdings was about $29 million.

As of Jan. 17, Semler Scientific held 2,321 BTC, with an aggregate purchase price of $191.9 million and an average price of $82,689.

UPDATE (Jan. 24, 13:06 UTC): Adds increased sale, interest rate other details starting in second paragraph.