Coinbase to raise $1.25 billion via Senior Convertible Notes

Coinbase to raise $1.25 billion via Senior Convertible Notes

Coinbase, after listing on the Nasdaq exchange on the 14th of April, 2021, is seeking a $1.25 billion cash injection from institutional investors. United States-based cryptocurrency exchange is seeking to raise these funds through a proposed private offering for institutional buyers.

According to an announcement yesterday, the offering will be in the form of senior convertible notes which will be due 2026. It will be available only for institutional investors who manage a minimum of $100 million in securities issued by other companies.

A senior convertible note is a debt security that entitles its holder to a stream of interest payments. Coinbase outlined the specific terms of its offering stating that: “Coinbase also expects to grant the initial purchasers of the notes a 30-day option to purchase up to an additional $187.5 million principal amount of notes solely to cover over-allotments. The notes will be senior, unsecured obligations of Coinbase, will accrue interest payable semi-annually in arrears and will mature on June 1, 2026, unless earlier repurchased, redeemed or converted. The notes will be convertible into cash, shares of Coinbase’s Class A common stock, or a combination thereof, at Coinbase’s election.”

According to the announcement, the interest and initial conversion will be set upon the pricing of the offering. Since news of the offering, the stock price has continued to trend downwards as the stock lost 3.92%, currently trading at $248.24. The stock has been seemingly following the trend of bitcoin which had already dropped by 31.02% from its peak.

What does this mean?

This means that Coinbase is looking to raise funds to bolster its operations even after listing on the Nasdaq exchange. They stated:

“This capital raise represents an opportunity to bolster Coinbase’s already strong balance sheet with low-cost capital that maintains operating freedom and minimizes dilution for Coinbase’s stockholders. Coinbase intends to use the net proceeds from the offering for general corporate purposes, which may include working capital and capital expenditures, and to pay the cost of the capped call transactions.”

The stock continues to underperform despite the exchange’s exceptional Q1’2021 results, which were released one week before the company’s direct listing on Nasdaq in April. Trading volume was up 276% with Q1 revenue hitting $1.8 billion.

In case you missed it

  • Coinbase made its highly anticipated debut on Nasdaq on Wednesday, April 14, 2021, becoming the first company devoted entirely to cryptocurrency to enter the US stock exchange.
  • The IPO of Coinbase Global was a big turning point for the cryptocurrency business. It had a rousing debut on Wall Street with the digital currency exchange’s stock growing as high as $429, giving it a market cap of $100 billion for a brief period of time.
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