Why DigitalOcean Stock Dived by Almost 11% Today

Key Points

• The company announced it was tapping investors for a new round of capital raising.

• This will take the form of a convertible notes issue.

• 10 stocks we like better than DigitalOcean ›

A darling of a tech stock last week, DigitalOcean (NYSE: DOCN) was looking rather wet on Monday. On news that the company is to launch a new round of capital raising, investors eagerly traded out of the cloud computing specialist's equity to leave it with an almost 11% loss on the day. Other stocks fared much better, as the S&P 500 index only dipped by 0.3%.

An important note about notes

Before market open, DigitalOcean announced that it aims to float a $500 million issue of convertible senior notes. These securities mature on Aug. 15, 2030, if not converted, and the initial purchasers will have an option to collectively buy another $75 million aggregate principal of the notes within a period of 13 days from issue.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Image source: Getty Images.

As convertible securities, the notes will accrue interest that is to be paid semiannually, although the company did not specify a rate. If converted, it will swap shares of its common stock or cash, as applicable. And after Aug. 15, 2028, the notes will be redeemable, fully or partly, at the company's option at any time up to 40 trading days before that 2030 maturity date.

In the press release trumpeting the issue, the company said it intends to use its share of the proceeds -- combined with as much as $500 million from a credit facility -- to repurchase existing convertible senior notes due to mature in 2026, and for transactions related to them.

Financial impact incoming

No matter if all, some, or none of the notes are converted into shares, this issue will affect DigitalOcean's financials. If unconverted, the notes will add considerably to a debt pile that already approached $1.8 billion as of the end of June. If converted, they would at least be moderately dilutive to the outstanding share count, which currently stands at slightly over 91 million.

Should you invest $1,000 in DigitalOcean right now?

Before you buy stock in DigitalOcean, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and DigitalOcean wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $653,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,119,863!*

Now, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 182% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 11, 2025

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends DigitalOcean. The Motley Fool has a disclosure policy.