Nebius Issues $1 Billion in Convertible Notes

Today, Nebius announced the issuance of two convertible notes totaling $1 billion, providing the company with additional resources to grow its business. In one of my earlier articles, I suggested that the company might choose to use a convertible note as a tool for raising capital — which is now exactly what has happened. Back then, I expected this move to occur in Q4 2025. Nevertheless, in terms of structure and size, the deal closely aligns with my expectations. The terms, however, are not entirely straightforward, so let’s take a closer look.

Deal Terms

So, what exactly is the company issuing? Two bond tranches of $500 million each, with different maturities (June 5, 2029 and June 5, 2031) and different annual coupon rates (2% and 3%, respectively), paid semiannually (on June 5 and December 5). But that’s not all. Both issues include what's known as an “Accreted Principal Amount” — essentially a mechanism that gradually increases the principal amount toward maturity.

The 2029 notes will be repaid at 120% of face value, and the 2031 notes at 125%. The principal increases on a fixed schedule throughout the life of the notes, with the growth slightly accelerating toward maturity — from 2.2% to 2.8% per half-year for the first tranche, and from 1.7% to 2.5% for the second. It's important to note that coupon interest is paid only on the original face value, not the accreted amount. Taking the accretion into account, the yield to maturity is approximately 6.4% for the 2029 notes and 6.3% for the 2031 notes — assuming the bonds are not converted into equity. And this conversion feature is where things get particularly interesting.

Conversion Option

Both tranches include an option to convert each $1,000 of face value into 19.4363 shares, implying a conversion price of $51.45. That’s about 40% above last Friday’s closing price, and only 7% below my revised fair value estimate for Nebius stock following the Q1 2025 earnings (you can read that analysis here). Due to the accreted principal, the effective conversion price at maturity increases to $61.74 for the 2029 notes ($1,200 / 19.4363), and $64.31 for the 2031 notes ($1,250 / 19.4363).

This means that regardless of when the conversion happens, the maximum potential dilution is 19.4 million shares — or 8.1% of the total shares outstanding as of the last quarter. I consider this a very positive outcome. Dilution is significantly lower than it would have been via a treasury stock sale, and the cost of servicing the convertible notes is lower than it would be for a plain-vanilla bond.

Bottom Line

I won’t go into detail here about the specific conditions under which the bonds can be converted — there are multiple triggers, and Nebius also retains the right to call the notes after 18 months (for the first tranche) and 24 months (for the second). The key takeaway is this: Nebius has secured $1 billion in fresh capital for expansion, and now has no immediate pressure to divest stakes in Avride, Toloka, or ClickHouse. If you missed it, my full breakdown of Nebius’s Q1 2025 earnings and recent developments prior to this bond issuance is available here.