Coinbase Plans To Acquire $1 Billion Through Convertible Notes

Coinbase intends to secure $1 billion via senior convertible notes to generate funds for debt repayment and unspecified corporate needs. The senior convertible notes, characterized as a debt instrument that holds the potential for later conversion into equity, will be exclusively offered to eligible institutional buyers.

The Importance Of The Notes

The decision by Coinbase to raise $1 billion through senior convertible notes was disclosed in an 8-K filing submitted to the United States Securities and Exchange Commission (SEC). These notes are granted seniority over common stock, providing holders with priority in case of bankruptcy or liquidation. They will accrue interest biannually and have the flexibility to be converted into cash, Coinbase shares, or a combination of both.

Coinbase has outlined its intention to utilize the proceeds to retire its existing convertible senior notes maturing in 2026, 2028, and 2031. The interests on these notes range up to 3.625%. Furthermore, the funds raised will be allocated for general corporate purposes, including working capital, capital expenditures, and covering the expenses associated with capped call transactions.

Coinbase Is Not The Only One

According to a blog post dated March 12th, Coinbase specified that the notes must be settled by April 1st, 2030, unless they are redeemed, repurchased, or converted earlier. The decision to pursue this financing option underscores a strategic maneuver by Coinbase to capitalize on market confidence, evident in its elevated share price, which recently reached a level not seen in over two years.

Earlier this week, MicroStrategy, the prominent corporate holder of Bitcoin (BTC), concluded an $800 million convertible note offering, utilizing the proceeds to augment its Bitcoin treasury reserve. Coinbase stock remained relatively unchanged on March 12th, registering a modest gain of around 0.8% and closing at $256. However, in after-hours trading following the announcement of the note offering, it experienced a decline of 2.3% to approximately $250.