_{We hope everyone had a great Thanksgiving weekend. For this week we wanted to switch things up a bit and talk about Iren, a super popular name all over Twitter and fin wits and has been the talk of retail investors alongside Nebius AI for months now. Just this week the company announced a dilution of the stock that we will get more into below, and the price of the stock plummeted 14% the day of this announcement. This week we wanted to explain to our readers what this dilution means and if we think the massive drop was an overreaction, or if there is a real reason to be worried about the stock.}

_{A big trend that we are beginning to see within the AI data center business is the big need for cash. Companies like Iren and Nebius have recently signed massive deals with huge names like Meta and Microsoft and other big players and are making massive promises to these companies for compute that they both do not yet have. The quickest and easiest way to basically get free cash is to dilute shares, which means that the company basically cut more pieces of the pie, which is very frustrating for original investors (of which we are not) and could be a great buy window for people who are currently on the sidelines.}

_{Iren recently raised cash by creating and selling around 40 million of these new shares that they created, which caused immediate dilution for people who were already invested. Iren sold these new shares for about $41 each, bringing in more than a billion dollars, which would instantly strengthen their balance sheet, but right away obviously hurts investors in the short term, due to their EPS getting cut since more shares equals less earnings per share.}

_{The good news is that Iren used most of that newly raised money to buy back older debt that could have caused massive dilution later due to a rise in the price meaning that debtors would own a larger dollar amount of the company. That old debt allowed investors to convert what they were owed into Iren stock at roughly $13 to $17 per share. If the stock price stayed above those levels, those investors would eventually convert and receive a huge amount of cheap stock, flooding the market and heavily diluting current shareholders. By paying off that old debt now, IREN removes the risk of this big future massive dilution, which helps clean up their long-term financial structure. This is a strategy most companies take and something that most likely had a ton of thought that went into it by the analysts at the company, and when a company is doing this to buy out debt, instead of using the cash to fund everyday operations, this is usually a good sign for the future of a company. To replace that old debt, Iren then issued new convertible debt, but with terms that only create dilution if the stock gets much more expensive. These new notes only convert into shares if IREN’s price rises above about $51, and the company also bought a financial hedge that helps limit dilution if the stock does reach those higher levels. Basically, Iren accepted a smaller amount of dilution today to eliminate a much bigger problem down the road, while also giving itself more flexibility and cash to fund future growth in areas like data centers and AI infrastructure.}

_{The 51$ amount is the level that sticks out big time to us when looking at this option to dilute. Most retail investors may assume that once the stock hits 51$ there will be a massive dilution that takes place again, sending the stock lower, but this is not how this works. The terms of the agreement clearly state that this only creates an option to sell the stock. This is why we believe that we may not see much selling before the stock hits 50$, but once it does, we think the panic by the retail investor may begin again, and we will see another sell off. This is when the deal becomes very enticing for us to enter a small position into the stock, setting up another rally up after more news hopefully takes place. Obviously, this strategy only works if you believe in the long-term strategy of Iren, which we do. Once the stock then hits 51$ again we believe that it will get stuck in the mud as these shareholders become “in the money” and selling at above 51$ would become more and more attractive. We believe that once the stock passes the 51$ threshold we will then enter into another position as the amount begins to rise again over that little speed bump. Please do not follow what we do as this is not financial advice, we are not advisors, and this is merely for fun, and to test out our little theories and learn from the patterns that we are seeing.}

The information provided in this newsletter is for educational and informational purposes only and should not be considered financial, investment, or legal advice. I am not a licensed financial advisor, and the opinions expressed are my own. Any investments, trades, or financial decisions you make are at your own risk. Always do your own research and consult with a qualified professional before making financial decisions. Past performance is not indicative of future results.

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