Cryptocurrency exchange Coinbase has revealed plans to raise $1 billion through a convertible debt offering, mirroring a strategy previously employed by MicroStrategy’s Michael Saylor. The move aims to provide Coinbase with capital while avoiding potential adverse effects on its stock price.
On March 12th, Coinbase announced its plans to initiate a private offering for qualified institutional buyers, aiming to raise $1.0 billion through Convertible Senior Notes maturing in 2030. The offering’s execution hinges on market conditions and serves as a means for Coinbase to access the debt market without detrimentally impacting its stock valuation.
The convertible notes, which are not secured, have the option to be converted into Coinbase shares (or cash) at a designated time, with a maturity date scheduled for April 1st, 2030. Furthermore, Coinbase intends to offer initial purchasers a 30-day opportunity to acquire an extra $150.0 million in principal amount of notes.
Taking a cue from MicroStrategy, which funded its Bitcoin purchases through convertible notes, Coinbase aims to mitigate dilution when the debt converts into equity by offering capped call transactions. These transactions serve as a hedge against dilution during conversion, ensuring existing shareholders’ interests are protected.
The decision to raise capital through convertible debt comes amid Coinbase’s rapid growth and the soaring price of Bitcoin, which recently hit an all-time high of $73,000. Coinbase intends to utilize the proceeds for debt repayment, capped call transactions, and potential acquisitions.
In a related development, Coinbase has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC), urging the regulator to establish clear regulatory guidelines for the crypto industry. The lawsuit challenges the SEC’s lack of formal rulemaking, which Coinbase argues hampers the industry’s development.