S-1/A: Hyperscale Data Eyes $50 Million Capital Injection Through Series B Preferred Stock Offering

Hyperscale Data, Inc. aims to raise up to $50 million by offering Series B Preferred Stock to a selling stockholder, with proceeds intended for data center development and debt repayment.

Summary

• Hyperscale Data, Inc. has filed an amendment to its Form S-1 registration statement for a proposed offering involving its Series B Convertible Preferred Stock.
• The company plans to offer up to 125,000,000 shares of Class A Common Stock issuable upon conversion of up to 50,000 shares of Series B Preferred Stock.
• The selling stockholder has committed to purchase up to $50 million of Series B Preferred Stock, at the company's direction, over approximately 51 months.
• Hyperscale Data will not receive any proceeds from the resale of Common Stock by the selling stockholder, but may receive up to $50 million from the sale of Series B Preferred Stock.
• The company intends to use the proceeds primarily for the development of its Michigan data center and repayment of debt.
• The Series B Preferred Stock will have a stated value of $1,000 per share and is convertible into Class A Common Stock at a price equal to the greater of $0.40 or 75% of the lowest VWAP during the five trading days prior to conversion, but not greater than $10.00 per share.
• Holders of the Series B Preferred Stock are entitled to cumulative cash dividends at an annual rate of 15%, payable monthly.
• The company's Common Stock trades on the NYSE American under the symbol GPUS, with a last reported sales price of $5.58 per share on May 14, 2025.
• Hyperscale Data is a smaller reporting company and has elected to comply with certain reduced public company reporting requirements.
• The company's long-term objective is to maximize per share intrinsic value, with major investment and capital allocation decisions made by the Executive Committee.
• Hyperscale Data is transitioning its data centers away from Bitcoin mining to operations dedicated to high-performance computing (HPC) and AI purposes.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While it highlights potential capital raising and strategic shifts towards HPC and AI, it also acknowledges risks related to dilution, market volatility, and regulatory uncertainties. The company's financial performance and dependence on external factors contribute to a neutral overall outlook.

Positives

• Potential for up to $50 million in gross proceeds to fund data center development and debt repayment.
• Series B Preferred Stock offers a 15% cumulative cash dividend, providing income to investors.
• Transition to HPC and AI operations could open new revenue streams and growth opportunities.
• The company's Executive Committee manages investment and capital allocation decisions.

Negatives

• The company will not receive any proceeds from the resale of Common Stock by the selling stockholder.
• The selling stockholder's conversion of Series B Preferred Stock to Common Stock will cause dilution to existing stockholders.
• The market price for the shares of Common Stock that the Selling Stockholder may receive upon conversion of the Series B Preferred Stock will fluctuate based on a number of factors beyond our control.
• The Selling Stockholder will be able to convert its Series B Preferred Stock at a conversion price lower than the then current market price of the Common Stock, which could cause the price of our Common Stock to decline.
• The company has broad discretion over the use of the net proceeds from our sale of shares of Series B Preferred Stock to the Selling Stockholder, if any, and you may not agree with how we use the proceeds and the proceeds may not be invested successfully.

Risks

• The company may not be able to access the full $50 million under the Purchase Agreement.
• The selling stockholder's conversion of Series B Preferred Stock to Common Stock will cause dilution to existing stockholders.
• The sale of shares of Series B Preferred Stock acquired by the selling stockholder, or the perception that such sales may occur, could cause the price of our Common Stock to fall.
• The company's management team may have broad discretion over the use of the net proceeds from our sale of shares of Series B Preferred Stock to the Selling Stockholder, if any, and you may not agree with how we use the proceeds and the proceeds may not be invested successfully.
• The company may not continue to satisfy NYSE American listing requirements, potentially leading to delisting.
• The company's Common Stock price is volatile.
• The company has a substantial number of convertible notes, warrants and preferred stock outstanding that could affect our price.
• The recent issuance of approximately 5 million shares of our Class B common stock to all of our holders of Common Stock through a dividend, and any future issuance of such Class B common stock, could provide such persons with voting control leaving our other stockholders unable to elect our directors and the holders of our shares of Common Stock will have little influence over our management.

Future Outlook

The company anticipates large expenditures in its Michigan Facility to facilitate the transition of the facility to support HPC and AI applications. Initially, these expenditures will likely increase Sentinum's losses unless they are able to pass these costs on to future customers. The company anticipates providing significant new funding to expand Ault Lending's loan and investment portfolio.

Management Comments

• Our long-term objective is to maximize per share intrinsic value.
• All major investment and capital allocation decisions are made for us by Mr. Ault and the Executive Committee.
• We anticipate returning value to stockholders after satisfying our debt obligations and working capital needs.

Industry Context

The document highlights Hyperscale Data's transition towards high-performance computing (HPC) and AI, reflecting a broader industry trend of data centers adapting to support computationally intensive applications. The company's focus on Bitcoin mining and data center operations places it within the competitive landscape of both the cryptocurrency and data services industries.

Comparison to Industry Standards

• Hyperscale Data's transition to HPC and AI mirrors moves by companies like Core Scientific and Marathon Digital, which are diversifying into cloud computing and AI services.
• The company's focus on owning and operating its mining facilities aligns with strategies of Bitfarms and Riot Blockchain, which emphasize control over infrastructure.
• The company's reliance on third-party mining pools is a common practice in the industry, similar to Hive Blockchain and Hut 8 Mining.
• The company's strategy of seeking low-cost, renewable power sources is consistent with industry trends towards sustainable mining practices, as seen with companies like Argo Blockchain and Greenidge Generation.
• The company's use of Gemini as a custodian for its Bitcoin holdings is a common practice among publicly traded mining companies, providing a secure and regulated storage solution.

Related Party Transactions

• On June 4, 2024, we entered into a Loan Agreement (the 2024 Credit Agreement) with OREE Lending Company, LLC and Helios Funds LLC, as lenders (Lenders). Each Lender is a 50% member of (and thus affiliate of) Orion Equity Partners, LLC (Orion).
• In October 2024, pursuant to the securities purchase agreement we entered into with Ault & Company, dated as of November 6, 2023 (the November 2023 SPA), we sold an aggregate of 1,400 shares of Series C Convertible Preferred Stock and warrants to purchase an aggregate of 11,825 shares of Class A common stock to Ault & Company, for an aggregate purchase price of $1.4 million.
• In November 2024, pursuant to the November 2023 SPA we entered into with Ault & Company, we sold an aggregate of 1,280 shares of Series C Convertible Preferred Stock and warrants to purchase an aggregate of 10,811 shares of Class A common stock to Ault & Company, for an aggregate purchase price of $1.3 million.
• In December 2024, pursuant to the November 2023 SPA we entered into with Ault & Company, we sold an aggregate of 3,020 shares of Series C Convertible Preferred Stock and warrants to purchase an aggregate of 25,509 shares of Class A common stock to Ault & Company, for an aggregate purchase price of $3.0 million.
• On December 21, 2024, we entered into a securities purchase agreement (the December 2024 SPA) with Ault & Company, pursuant to which we agreed to sell, in one or more closings, to Ault & Company up to 25,000 shares of Series G convertible preferred stock (Series G Preferred Stock) and warrants to purchase up to 4.2 million shares of Class A common stock (the Series G Warrants) for a total purchase price of up to $25.0 million.

Stakeholder Impact

• Shareholders may experience dilution due to the conversion of Series B Preferred Stock.
• Employees may be affected by the company's strategic shift towards HPC and AI.
• Customers may benefit from improved data center services and AI-powered solutions.
• Suppliers may see changes in demand as the company transitions its operations.
• Creditors may be impacted by the company's plans to use proceeds for debt repayment.

Next Steps

• The company will continue to develop its Michigan data center to support HPC and AI applications.
• The company will seek to meet the closing conditions under the Purchase Agreement to receive proceeds from the sale of Series B Preferred Stock.
• The company will monitor and adapt to evolving regulations in the cryptocurrency and AI industries.
• The company will continue to evaluate other sites, locations, and partnerships for additional and alternative support of future mining operations.

Key Dates

Keywords

Series B Preferred Stock, Common Stock, Hyperscale Data, Selling Stockholder, Convertible, Offering, Data Center, AI, HPC, Financing