Coinbase Takes a Page from MicroStrategy’s Playbook with $1 Billion Debt Offering

Coinbase, the largest U.S.-based crypto exchange by daily trading volumes, has announced plans to raise $1 billion through the sale of convertible senior notes to qualified institutional buyers.

TLDR

• Coinbase announced a $1 billion convertible senior notes offering to qualified institutional buyers, with an option to purchase an additional $150 million.
• The notes will mature on April 1, 2030, and are convertible to Coinbase’s Class A stock, cash, or a mix of both upon maturation.
• Coinbase is taking a similar approach to MicroStrategy, which has raised capital through convertible notes to fund its Bitcoin purchases.
• The exchange is offering “negotiated capped call transactions” to reduce dilution when the debt is converted into equity.
• The move comes after a rally in Bitcoin and Coinbase’s stock price, with the company potentially using the proceeds to repay debt, pay for capped call transactions, and acquire other companies.

The notes, which will mature on April 1, 2030, are being offered as a way for the company to shore up funds to repay existing debts and cover corporate costs.

Upon maturation, the notes will be convertible to Coinbase’s Class A stock, cash, or a combination of both, depending on the holder’s preference.

The offering also includes an option for investors to purchase an additional $150 million worth of notes within the first 30 days of the sale.

This move by Coinbase follows a similar strategy employed by MicroStrategy, which has raised significant capital through convertible notes to fund its Bitcoin acquisitions.

To reduce the potential dilution of its stock when the debt is converted into equity, Coinbase is offering “negotiated capped call transactions” as part of the offering.

The announcement of the convertible senior notes offering comes amidst a rally in both Bitcoin prices and Coinbase’s stock, which has gained over 40% in the past year.

Despite the recent market implosion following the collapse of FTX in November 2022 and ongoing legal battles with regulators, Coinbase appears to be seizing the opportunity to secure additional funding while its stock price is near a 26-month high.

The proceeds from the offering may be used by Coinbase to repay existing debts, pay for the capped call transactions, and potentially fund acquisitions of other companies in the future.

While the company’s revenue in 2023 was down compared to the previous year’s bull run, Coinbase still maintains a significant cash reserve and a market capitalization of over $60 billion, positioning it well for future growth in the rapidly evolving crypto market.

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