As the cryptocurrency market continues to rise, US-listed cryptocurrency exchange Coinbase announced today its plan to sell $1 billion worth of convertible corporate bonds to institutional investors, following the footsteps of MicroStrategy’s BTC purchase.
Coinbase, which has recently become the fourth-largest listed exchange globally with a one-year surge of 210% in stock price and a market value nearing $50 billion, aims to raise funds for its cryptocurrency vision by avoiding equity sales that could potentially harm its stock price.
To avoid diluting shareholders’ ownership percentage, Coinbase will issue unsecured convertible bonds through private placement, set to mature in 2030. These convertible bonds can be converted into company stocks or cash based on certain conditions. By utilizing the bond market to raise funds for its cryptocurrency business, Coinbase is mimicking the strategy adopted by MicroStrategy in recent years. MicroStrategy has purchased 205,000 bitcoins, currently valued at nearly $15 billion, with a significant portion of the purchasing funds coming from the sale of over $2 billion worth of convertible bonds.
MicroStrategy has just revealed that it has spent $820 million in the past month to purchase 12,000 additional bitcoins, with the funds obtained through the issuance of $800 million worth of preferred convertible corporate bonds to qualified institutional investors through private placement.
Coinbase, with its stock price skyrocketing by 63% this year alongside a 67% surge in Bitcoin, often takes advantage of bull markets to raise funds through issuing new securities such as stocks and convertible bonds.
Coinbase stated that the proceeds from this transaction may be used for debt repayment, payment of expenses related to potential capped call transactions, investment, or acquisition of other companies, products, or technologies. It is worth noting that Coinbase reduces dilution when debt is converted into equity through the provision of negotiated capped call transactions, essentially hedging against the potential dilution of existing shareholders’ equity during the bond conversion period.
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