Fermi (FRMI) Stock Craters 16% — Is the $375M Notes Deal a Red Flag?

TLDR

• Fermi stock dropped ~16.6%, opening at $6.15 after closing at $7.32, on volume of over 22 million
• The company priced an upsized $375M convertible senior notes offering at 5.00% due 2031, with potential total issuance reaching $431.25M
• Conversion price is set at ~$9.52 per share, raising dilution fears among investors
• Fermi reported a net loss of ~$189M in Q1 2026 with zero revenue, missing analyst estimates
• Insider selling has been heavy, with over 1 million shares sold in the last 90 days worth ~$7.3M

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Fermi (FRMI) stock fell roughly 16.6% on Friday after the company priced a $375 million convertible senior notes offering late Thursday. The stock opened at $6.15, down from a prior close of $7.32, and last traded around $6.19 on volume exceeding 22 million.

Fermi Inc. Common Stock, FRMI

The notes carry a 5.00% rate and mature in 2031. They were sold to qualified institutional buyers under Rule 144A. Initial purchasers also hold an option to buy an additional $56.25 million in notes, bringing the potential total to $431.25 million.

The conversion price is set at approximately $9.52 per share. Fermi said it will use part of the proceeds to fund capped call transactions, a structure designed to limit dilution for existing investors up to $14.64 per share.

Despite that cushion, the market wasn’t impressed. The prospect of that much dilution hitting a stock already under pressure was enough to spark a sharp sell-off that began in after-hours trading and carried into Friday’s session.

Q1 Numbers Didn’t Help

The offering lands on already shaky ground. Fermi reported a net loss of approximately $189 million in Q1 2026, driven largely by non-cash share-based compensation. The company generated zero revenue during the quarter, missing analyst forecasts entirely.

That miss had already triggered a wave of analyst downgrades. Evercore cut Fermi from “outperform” to “in-line.” Wall Street Zen dropped it from “hold” to “sell.” Stifel Nicolaus slashed its price target from $29.00 to $17.00, though it kept a “buy” rating. Weiss Ratings reiterated a “sell (d-)” rating as recently as July 2.

The consensus rating across analysts sits at “Moderate Buy” with an average price target of $22.44 — a long way from where the stock is trading today.

The company said proceeds from the notes will help fund Project Matador, its gigawatt-scale AI power campus in Amarillo, Texas.

Insider Selling Adds to Pressure

Insider activity has not been reassuring. Director James Richard Perry sold 863,637 shares on June 30 at an average price of $7.31, a transaction worth over $6.3 million. That sale reduced his ownership by 5.17%.

Insider Mesut Uzman also sold 79,509 shares on June 3 at $6.31 per share. In total, insiders have sold over 1 million shares in the past 90 days, worth approximately $7.3 million.

Cantor Fitzgerald initiated coverage in April with an “overweight” rating and an $8.00 price target — one of the more cautious bull cases on the street.

The stock’s 52-week high stands at $36.99. Friday’s trading has pushed FRMI toward $6.19, not far above its 52-week low of $4.47. The convertible notes deal is set to close on July 14, 2026.