Fermi launches $350M convertible notes offering amid CEO search and governance litigation

Fermi launched a private placement of $350 million in convertible senior notes maturing in 2031, sold to qualified institutional buyers under Rule 144A. The initial purchasers have a 13-day option to buy up to an additional $52.5 million in notes, which could bring the total offering to $402.5 million. Convertible notes allow holders to convert debt into equity under specified conditions, potentially diluting existing shareholders but providing the company with lower-cost financing than straight debt.

Fermi will use a portion of the proceeds to purchase capped call transactions, which are derivative instruments that help offset potential dilution from the convertible notes by limiting the number of shares the company must issue upon conversion. The remaining proceeds will go toward general corporate purposes. The capped call strategy is a common technique to manage dilution risk from convertible debt offerings.

Fermi provided excerpts from its preliminary offering memorandum and an updated investor presentation as exhibits to this 8-K, making information shared with prospective note buyers available to all investors under Regulation FD (Fair Disclosure). These materials may contain updated financial metrics, business developments, or forward-looking statements not previously disclosed publicly.

Fermi is offering $350 million in convertible notes. The offering memorandum shows this will increase total indebtedness from $439.1 million to $789.1 million and boost cash from $207.5 million to $557.5 million as of March 31, 2026. The notes are structurally subordinated to existing equipment financings with MUFG, Keystone, and Beal.

Former CEO Toby Neugebauer was terminated for cause on April 30, 2026, and removed from the Board. He has filed litigation challenging a 70% supermajority bylaw amendment and claiming authority to call a special shareholder meeting. The company warns an adverse ruling could invalidate governance measures including the staggered board structure and facilitate board composition changes. The company is in advanced discussions with a CEO candidate but has made no appointment.

As of June 30, 2026, Fermi had $444.9 million outstanding under MUFG equipment financing (bearing interest at Term SOFR plus 4.0% or Daily Simple SOFR plus 4.0%), $77.3 million under Keystone financing (at 12.90% per annum), and $14.7 million under Beal financing (at 12.00% per annum, rising to 14.00% during default). These are subsidiary-level obligations to which the new notes will be structurally subordinated.

Fermi's unrestricted cash declined from $207.5 million at March 31, 2026, to $62.8 million at June 30, 2026 (total cash of $92.0 million less $29.2 million restricted). This $144.7 million decline in unrestricted cash over one quarter occurred before the convertible note proceeds and underscores the company's need for the financing.

Fermi Inc. filed an investor presentation dated July 2026 as an exhibit to this 8-K. The presentation provides an overview of the company's Project Matador energy campus, power generation strategy, leadership team, and commercial progress. This type of disclosure is typically made to update investors on strategic initiatives and operational milestones.

The company expanded its Board of Directors from 5 to 7 members and is actively searching for a new CEO, with discussions described as advanced. Additionally, Fermi established a new headquarters in Dallas, Texas. These governance changes suggest the company is strengthening its leadership structure during a period of significant operational scaling.

Fermi disclosed it is actively engaged with 7 prospective tenants and 12 potential strategic partners, with management expressing increased confidence about securing value-enhancing transactions. The company expects to sign its first binding joint venture partner and/or tenant agreement in Q3 2026, which would represent a significant commercial milestone for the energy campus project.

Fermi disclosed nearly $1 billion in financing commitments across four facilities: a $500 million MUFG facility for turbines (approximately $445 million drawn), a $120 million Keystone facility for electrical components (approximately $77 million drawn), a $165 million Beal Bank facility for additional turbines (approximately $15 million drawn), and a $156 million Yorkville promissory note (undrawn). The MUFG proceeds were partially used to pay off a prior Macquarie term loan. These commitments support the company's equipment procurement and operational needs.

The presentation outlines Fermi's power generation roadmap, targeting 1.5 GW by year-end 2027, 2 GW by 2028, and up to 17 GW at scale (11 GW from natural gas and 6 GW from nuclear). The company has secured a 6 GW federal air permit and filed for an additional 5 GW. However, the forward-looking statements note that capacity beyond currently permitted levels is subject to additional permits, financing, interconnection capacity, and other factors.

Fermi intends to offer $350 million of convertible senior notes due 2031 to qualified institutional buyers, with an option for initial purchasers to buy an additional $52.5 million. The notes will be senior unsecured obligations, convertible into cash, common stock, or a combination at the company's election, with interest payable semi-annually and maturity on July 15, 2031.

Fermi plans to use offering proceeds to purchase capped call transactions designed to reduce potential dilution from note conversions and offset cash payments above principal on converted notes, with remaining proceeds for general corporate purposes. The capped calls will initially cover the number of shares underlying the notes, subject to a cap on the reduction/offset benefit.

The option counterparties are expected to hedge their positions by entering derivative transactions and/or purchasing Fermi common stock around the pricing date, which could affect the stock price. Additional hedging activity may occur during the 30-trading-day valuation period before maturity or following early conversions, potentially impacting stock price and conversion economics for noteholders.

The notes will be senior unsecured obligations ranking equal with other unsecured debt, but effectively junior to secured debt (to the extent of collateral value) and structurally subordinated to all subsidiary liabilities. This means noteholders have claims behind secured creditors and subsidiary creditors in a default scenario.