Nvidia Sparks AI Acquisition Buzz With $10B Mixed-Shelf Offering

Close on the heels of robust quarterly results, graphic chips giant Nvidia Corp. NVDA filed for an S-3 registration statement with the SEC for a mixed-shelf offering.

What Happened: Santa Clara, California-based Nvidia said it plans to sell securities, including common stock, preferred stock, depository shares representing preferred stock, debt securities, warrants, stock purchase contracts and stock purchase units, to raise an aggregate of $10 billion.

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The company suggested that the sale could be done from time to time, with the terms to be determined at the time of the offering. The offering could involve a particular security or a combination of these, it added.

Nvidia now has eight billion authorized shares and two million worth of authorized preferred shares, with 2.47 billion of the common stock outstanding and no preferred stock outstanding.

The company did not specify the purpose for the potential net proceeds from the offering, although it did say it would use the net proceeds as set forth in the applicable prospectus supplement.

Why It’s Important: After two disappointing quarters in 2022 amid the semiconductor inventory correction, general economic uncertainties and the China chip ban, Nvidia appears to be on the road to recovery, going by the fourth-quarter results. The fourth-quarter earnings release as well as management commentary on the earnings call underlined that Nvidia is planning to pivot to artificial intelligence in a big way.

After ending 2022 with a loss of a little over 50%, Nvidia’s shares have been on the mend, advancing about 59% year-to-date.

Following Nvidia’s announcement concerning the offering, investors had a field day, guessing the potential need for additional funding. “Wonder if $NVDA’s $10B mixed shelf is being filed with potential M&A in mind. They don’t need the money otherwise,” said a tech trader, while sharing a screenshot of the free cash flow for the company — both actuals and projections into January 2026 — which showed that the cash flow would rise to $14.6 billion by that time.

Wonder if $NVDA's $10B mixed shelf is being filed with potential M&A in mind. They don't need the money otherwise. pic.twitter.com/6Rb868ikFy

— Eric Jhonsa (@EricJhonsa) February 28, 2023

The trader also noted that an Nvidia spokesperson said the mixed shelf offering would replace the one from March 2020 that expires next month and would also allow the company access capital markets as the need arises.

Some of the potential use cases for the proceeds discussed included a software-related deal, given it has a lower risk from the China overhang, vertical integration by adding a fab and strengthen AI offering with Scale AI, a San Francisco, California-based AI company founded in 2016 by Alexander Wang.

Price Action: Nvidia, which closed Tuesday’s session down 1.21%, at $232.16, fell an incremental 1.71%, at $228.20, in after-hours trading, according to Benzinga Pro data.

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