Coinbase to raise $1 billion for debt repayment from convertible notes

Coinbase global is planning to raise and offer $1 billion from senior convertible notes to repay its debts, as well as use the funds for operational expenditures.

The initiative leverages the current investor optimism reflected in its stock prices, which have soared to a two-year high.

These senior convertible notes are a type of debt security that can be converted as equity at an assigned period. According to the 8-K filing submitted by Coinbase to the SEC, this will be offered privately for institutional buyers who are eligible. The document did not specify whether there is a pre-qualification round or if Coinbase is already eyeing certain financial institutions to invite for the deals.

The filing also details that the eligible institutional buyers are given until April 1, 2030, to fully repay the convertible notes, subject to conditions of redemption or conversion.

Prioritized above common stock in liquidation scenarios, these notes will accumulate interest semi-annually, offering conversion into either cash, Coinbase shares, or a mix of both by April 1, 2030. This financial mechanism is crafted to attract institutional investment, banking on the company’s elevated share value and market confidence.

With the proceeds from this offering, Coinbase intends to address its immediate financial obligations, specifically the repayment of its outstanding convertible senior notes due in 2026, 2028, and 2031, which carry interest rates of 0.50%, 3.375%, and 3.625% respectively. The remainder of the funds is earmarked for a variety of corporate purposes, including working capital enhancement, capital expenditure projects, and the financing of capped call transactions.

This allocation reflects a broader strategy to solidify Coinbase’s financial health and operational flexibility, paralleling similar fundraising efforts by industry peers such as MicroStrategy’s recent convertible note offering aimed at Bitcoin acquisition.

Despite the announcement, Coinbase’s stock (COIN) exhibited marginal movement, closing up 0.8% at $256 on March 12, then retracting slightly by 2.3% in after-hours trading. However, with a 63% gain year-to-date and stock prices reaching a 26-month pinnacle, the company’s market position appears to be on the rise.