Stem, Inc. exchanges $350M converts for $155M high-coupon secured notes

Rhea-AI Filing Summary

Stem, Inc. (NYSE: STEM) filed an 8-K on 30 June 2025 disclosing a privately negotiated debt exchange that materially reshapes its capital structure. The company exchanged (i) $228.818 million of its 0.50% Green Convertible Senior Notes due 2028 and (ii) $121.310 million of its 4.25% Green Convertible Senior Notes due 2030 — a combined $350.128 million in principal — plus $10 million in cash for three new instruments:

• $155.426 million aggregate principal amount of new 12.00%/11.00% senior secured PIK toggle notes due 2030 (the “New Notes”).
• Warrants to purchase 439,919 common shares at a strike price of $30.00, exercisable from the 11th trading day after issuance until 1 December 2030 and subject to customary anti-dilution adjustments and a 4.99% (optionally 9.99%) ownership cap.
• Payment of accrued and unpaid interest on the exchanged notes.

The New Notes were issued under an Indenture dated 30 June 2025 with U.S. Bank Trust Company, N.A. acting as trustee and collateral agent. Interest may be paid in kind at 12.00% or in cash at 11.00%, payable semi-annually beginning 1 January 2026. Maturity occurs on the earliest of: (a) 30 December 2030; (b) a covenant-based trigger tied to remaining 2028 converts after 30 June 2028; or (c) a similar trigger related to remaining 2030 converts after 1 January 2030. The notes and related guarantees are secured by a first-priority lien on substantially all assets of Stem and its restricted subsidiaries and may be redeemed by the company at premiums of 105%, 102.5%, and 100% depending on the redemption window.

The exchanged warrants were issued under a Warrant Agreement with Computershare Trust Company, N.A. Holders have no shareholder rights until exercise and may request cash settlement upon a defined “Fundamental Change.”

Accounting / reporting impacts:

• The transaction reduces Stem’s outstanding convertible principal by approximately $184.7 million but replaces low-coupon unsecured convertible debt with higher-coupon senior secured obligations.
• The exchange constitutes a material definitive agreement (Item 1.01), creates a direct financial obligation (Item 2.03), and involves unregistered equity securities (Item 3.02).
• A related press release announcing closing of the exchange was furnished under Regulation FD (Item 7.01) and not deemed “filed.”

Exhibits include the Indenture (4.1), form of New Notes (4.2), Warrant Agreement (4.3), and the press release (99).

Positive

• Gross principal obligations reduced by approximately $184.7 million through the exchange of $350.1 million converts for $155.4 million new notes.
• Maturity profile streamlined; new notes push potential final maturity to December 2030 and remove near-term conversion put risk.

Negative

• Interest cost rises sharply from 0.50%/4.25% to 11-12%, increasing future expense.
• Assets now pledged under a first-priority lien, subordinating existing unsecured creditors and limiting balance-sheet flexibility.
• Potential shareholder dilution from 439,919 warrants exercisable at $30.00 through 2030.

Insights

Financial Analyst

TL;DR: Debt exchange cuts principal by ~$185 M but adds 11-12% secured notes and dilution-potential warrants.

The exchange removes $350 M of low-coupon converts and introduces $155 M of senior secured PIK toggle notes plus 440 K warrants. Principal reduction is material, improving gross leverage metrics, yet coupon steps up from 0.50%/4.25% to 11-12%, raising annual interest expense once electing cash payments. PIK flexibility defers cash drain in early years. Secured status and broad collateral package subordinate existing unsecured creditors. Warrants represent <1% potential dilution but signal higher cost of capital. Overall credit profile shifts toward smaller but costlier, secured debt. Effect on equity holders depends on future cash generation versus higher coupon load.

Credit Risk Analyst

TL;DR: Exchange improves maturity ladder but increases security ranking and coupon risk—credit-neutral.

From a creditor standpoint, retiring converts with secured notes eliminates near-term put risk and adds stringent collateral covenants. The 105% call premium through 2027 limits optional redemption flexibility. PIK feature mitigates default risk short-term but compounds principal if used extensively. Trigger-based accelerated maturity tied to residual converts preserves refinancing discipline. Overall, leverage declines, but higher effective interest and asset encumbrance offset benefits—yielding a neutral impact on default probability.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date Earliest Event Reported): June 30, 2025

STEM, INC.

(Exact name of registrant as specified in its charter)

Delaware		001-39455		85-1972187
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

1400 Post Oak Boulevard, Suite 560 Houston, Texas 77056

(Address of principal executive offices including zip code)

1-877-374-7836

Registrant’s telephone number, including area code

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e- 4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, par value $0.0001		STEM		New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 1.01. Entry into a Material Definitive Agreement.

Exchange Agreement

On June 27, 2025, Stem, Inc. (the “Company”) entered into a privately negotiated exchange agreement (the “Exchange Agreement”) with certain of the holders of the Company’s 0.50% Green Convertible Senior Notes due 2028 (the “2028 Convertible Notes”) and/or the Company’s 4.25% Green Convertible Senior Notes due 2030 (the “2030 Convertible Notes”), to exchange (the “Exchange”) (i) $228,818,000 principal amount of the 2028 Convertible Notes and (ii) $121,310,000 principal amount of the 2030 Convertible Notes (clauses (i) and (ii) together, the “Exchanged Notes”) and (iii) $10,000,000 of cash, less amounts in lieu of fractional notes, for (a) $155,426,583 in aggregate principal amount of the Company’s new 12.00%/11.00% Senior Secured PIK Toggle Notes due 2030 (the “New Notes”), (b) Warrants (the “Warrants”) exercisable for shares of common stock, $0.0001 par value per share, of the Company (the “Common Stock”) and (c) accrued and unpaid interest on the Exchanged Notes to (but excluding) the date of the closing of the Exchange (collectively, the “Exchange Transactions”).

The New Notes and Warrants were issued in private placement transactions pursuant to the exemptions provided by Rule 144A, Regulation S and Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

Indenture and Notes

In connection with the issuance of the Notes, the Company entered into an Indenture dated June 30, 2025 (the “Indenture”), with the guarantors identified therein (the “Guarantors”) and U.S. Bank Trust Company, National Association, as the Trustee and notes collateral agent (the “Collateral Agent”). The terms of the Notes are governed by the Indenture. At the Company’s election for any interest period, the New Notes will bear interest at a rate of (i) 12.00% per annum on the principal amount thereof if interest is paid in kind, subject to a maximum amount of interest able to be paid in kind set forth in the Indenture, and (ii) 11.00% per annum on the principal amount thereof if interest is paid in cash, in each case payable semi-annually in arrears on July 1 and January 1 of each year, beginning on January 1, 2026, to the noteholders of record of the New Notes as of the close of business on the immediately preceding June 15 and December 15, respectively.

The New Notes will mature on the earlier of (a) December 30, 2030, (b) the date, if any, on or after June 30, 2028 on which (x) the aggregate principal amount of the 2028 Convertible Notes then outstanding is greater than $15,000,000 and (y) the difference between the amount of unrestricted cash and cash equivalents held by the Company and its restricted subsidiaries and the aggregate principal amount of the 2028 Convertible Notes outstanding as of such date of determination is less than $30,000,000, and (c) the date, if any, on or after January 1, 2030 on which (x) the aggregate principal amount of the 2030 Convertible Notes then outstanding is greater than $15,000,000 and (y) the difference between the amount of unrestricted cash and cash equivalents held by the Company and its restricted subsidiaries and the aggregate principal amount of the 2030 Convertible Notes outstanding as of such date of determination is less than $30,000,000.

The New Notes are guaranteed by certain of the Company’s current and future restricted subsidiaries on a senior secured basis. The New Notes and the guarantees will be secured by a first priority lien on substantially all of the assets of the Company and the Guarantors, subject to certain exceptions.

The Notes will be redeemable, in whole or in part, for cash at the Company’s option at any time, and from time to time, at the following redemption prices: on or after the date of issuance to December 31, 2027, at 105.00% of the principal amount of the notes being redeemed, including interest paid in kind, if any, plus accrued and unpaid interest; from January 1, 2028 to December 31, 2028, at 102.50% of the principal amount of the notes being redeemed, including interest paid in kind, if any, plus accrued and unpaid interest; and on or after January 1, 2029, at 100.00% of the principal amount of the notes being redeemed, including interest paid in kind, if any, plus accrued and unpaid interest.

The indenture also contains customary events of default.

Warrant Agreement

The Warrants were issued pursuant to a warrant agreement (the “Warrant Agreement”) with Computershare Trust Company, N.A. and its affiliate Computershare Trust Company, N.A., as warrant agent. Pursuant to the Warrant Agreement, the Company issued warrants (“Warrants”) to purchase 439,919 shares (subject to adjustment in accordance with its terms) of Common Stock (the “Warrant Shares”), with a strike price of $30.00 (the “Exercise Price”), subject to the cashless exercise provisions contained in the Warrant Agreement.

The Warrants are exercisable from the eleventh trading day following the date of issuance of the Warrants until December 1, 2030 (the “Expiration Date”).

The Exercise Price is subject to adjustment from time to time upon the occurrence of certain dilutive events, including (a) stock dividends and splits, (b) the issuance of options or other convertible securities in certain circumstances, (c) certain other dividends or distributions, (d) a tender or exchange offer by the Company to purchase or redeem Common Stock in certain circumstances, and (e) certain reclassification, reorganization or charge of the of the Common Stock.

Whenever the Exercise Price is adjusted as provided above, the number of Warrant Shares for which a Warrant is exercisable (the “Warrant Share Number”) shall simultaneously be adjusted by multiplying the Warrant Share Number in effect immediately prior to such adjustment by a fraction, the numerator of which shall be the Exercise Price immediately prior to such adjustment, and the denominator of which shall be the Exercise Price immediately thereafter.

In the event of a Fundamental Change (as defined in the Warrant Agreement), upon request, the holders of Warrants will receive cash in an amount and as determined in accordance with the Warrant Agreement.

Subject to limited exceptions, a holder of Warrants will not have the right to exercise any portion of its Warrants if the holder (together with any persons whose beneficial ownership of Common Stock would be aggregated with such holder’s for purposes of Section 13(d) of the Exchange Act and the applicable rules and regulations of the SEC, including any group, within the meaning of the Exchange Act, of which such holder or such holder’s affiliates is a member) would beneficially own a number of shares of Common Stock in excess of 4.99% of the Common Stock then outstanding immediately after giving effect to such exercise (the “Maximum Percentage”); provided, however, that upon 61 days’ notice to the Company, the holder may increase (with such increase not effective until the sixty-first (61st) day after delivery of such notice) or decrease the Maximum Percentage to any other percentage not in excess of 9.99% as specified in such notice.

Pursuant to the Warrant Agreement, no holder of a Warrant, by virtue of holding or having a beneficial interest in the Warrant, will have the right to vote, receive dividends, receive notice as stockholders with respect to any meeting of stockholders for the election of the Company’s directors or any other matter, or exercise any rights whatsoever as a stockholder of the Company unless, until and only to the extent such holders become holders of record of Common Stock issued upon exercise of the Warrants.

The foregoing description of the Exchange Agreement, the Indenture, the Notes and the Warrant Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the agreements. Copies of the Indenture, the form of Notes and the Warrant Agreement, which are attached as Exhibit 4.1, Exhibit 4.2 and Exhibit 4.3, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth in Item 1.01 above is incorporated by reference into this Item 2.03.

Item 3.02 Unregistered Sales of Equity Securities.

The information set forth in Item 1.01 above is incorporated by reference into this Item 3.02.

Item 7.01. Regulation FD Disclosure.

On June 30, 2025, the Company issued a press release announcing the closing of the Exchange, a copy of which is attached as Exhibit 99 to this Current Report on Form 8-K and is incorporated herein by reference. The information furnished pursuant to Item 7.01 on this Current Report on Form 8-K, including Exhibit 99 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as expressly provided by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.		Description
4.1		Indenture dated June 30, 2025, by and among the Company, the Guarantors and U.S. Bank Trust Company, National Association, as trustee and notes collateral agent
4.2		Form of 12.00%/11.00% Senior Secured PIK Toggle Notes due 2030 (included in Exhibit 4.1)
4.3		Warrant Agreement, dated June 30, 2025, by and among the Company, Computershare Trust Company, N.A. and its affiliate Computershare Trust Company, N.A., as warrant agent
99		Press Release issued June 30, 2025
104		Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

				STEM, INC.
Date: June 30, 2025				By:		/s/ Saul R. Laureles
				Name:		Saul R. Laureles
				Title:		Chief Legal Officer and Secretary

FAQ

Why did STEM exchange its 2028 and 2030 convertible notes?

To retire $350.128 million of convertibles and issue $155.426 million of higher-coupon senior secured notes plus warrants, thereby reshaping its debt profile.

What are the key terms of Stem’s new 12%/11% PIK toggle notes?

The notes bear 12% PIK or 11% cash interest, payable semi-annually, mature by 30 Dec 2030 (subject to triggers) and are secured by first-priority liens.

How many warrants were issued and at what strike price?

Stem issued 439,919 warrants with a $30.00 strike price, exercisable until 1 Dec 2030.

Will the transaction increase Stem’s interest expense?

Yes. The exchanged convertibles carried 0.50% and 4.25% coupons versus the new notes’ 11-12% rate, implying higher future interest costs.

Does the warrant agreement limit ownership concentration?

Yes. Holders cannot exercise warrants beyond 4.99% of outstanding shares (optionally 9.99% with 61-day notice).