US-listed cryptocurrency exchange Coinbase announced today that it will expand the issuance of $1.1 billion in convertible senior notes, increasing the size from the previously announced $1 billion. With the ongoing bull market in cryptocurrencies, Coinbase is following the strategy implemented by MicroStrategy in recent years by issuing corporate bonds to finance its cryptocurrency vision. Convertible bonds can be converted into company stock, cash, or a combination of both under certain conditions, avoiding dilution of existing shareholders’ ownership and potential impact on stock prices.
As the company with the largest holdings of Bitcoin, MicroStrategy has already purchased 205,000 Bitcoins, currently valued at over $15 billion, with a significant portion of the purchase funds coming from the sale of over $2 billion in convertible bonds. Today, MicroStrategy announced the issuance of an additional $500 million in convertible bonds to further increase its Bitcoin holdings.
Coinbase is now issuing $1.1 billion in unsecured convertible bonds through private placement to qualified institutional buyers. The bonds will mature in 2030 and carry a coupon rate of 0.25%. The sale is expected to be completed on March 18, 2024, and is projected to bring in net proceeds of approximately $1.08 billion to $1.24 billion for Coinbase.
Regarding the use of the funds raised from this bond issuance, Coinbase stated that it plans to use them for debt repayment, redemption and repurchase of previously issued convertible bonds prior to maturity, general corporate purposes, and potential investments or acquisitions of other companies, products, or technologies.
There are also market speculations that Coinbase may follow in the footsteps of MicroStrategy and make significant Bitcoin purchases. Coinbase currently holds 9,480 Bitcoins, making it the fourth-largest Bitcoin holder among publicly traded companies. The current value of these holdings is nearly $691 million, with a cost of approximately $117 million, resulting in a floating profit of $574 million.
In addition, as Bitcoin has surged more than 69.75% year-to-date, the stock price of Coinbase has also skyrocketed. COIN has risen over 60% this year and closed today at $251.73, with a market capitalization surpassing $60.9 billion.
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