With the continuous rise of the cryptocurrency market, Coinbase, a US-listed cryptocurrency exchange, announced today its plan to sell $1 billion in convertible corporate bonds to institutional investors. This move is aimed at avoiding equity sales that may harm its stock price and follows the footsteps of MicroStrategy in buying BTC.
Coinbase will raise funds of $1 billion through the sale of convertible corporate bonds in order to avoid dilution of shareholder proportion through new stock sales. The bonds, which will mature in 2030, can be converted into company stock or cash based on certain conditions. By using the bond market to raise funds for its cryptocurrency business, Coinbase is emulating MicroStrategy’s strategy of the past few years. MicroStrategy has purchased 205,000 bitcoins, currently valued at nearly $15 billion, with most of the funding coming from the sale of over $2 billion in convertible bonds.
MicroStrategy recently revealed that it has invested $820 million to acquire an additional 12,000 bitcoins in the past month, with the funding coming from the issuance of $800 million in convertible corporate bonds to qualified institutional investors.
With bitcoin rising by 67% this year and Coinbase’s stock price surging by 63% due to the strong growth in the cryptocurrency market, publicly listed companies often take advantage of bull markets to raise funds through the sale of new securities such as stocks and convertible bonds.
Coinbase stated that the proceeds from this transaction may be used to repay debts, pay expenses for potential capped call transactions, and may be used for investments or acquisitions of other companies, products, or technologies.
Note: Coinbase reduces dilution of equity when converting debt into equity by providing “negotiated capped call transactions,” which essentially serves as a hedge against dilution of existing shareholders’ equity during the bond conversion period.
Related Reports:
Bitcoin hits $72,000! MicroStrategy invests $820 million to buy 12,000 BTC
Bitcoin approaching $4,100, Coinbase analysis: BTC faces short-term resistance
Coinbase experiences major outage! BTC trading halted, accounts zeroed… CEO apologizes for traffic exceeding expectations tenfold
Coinbase and a16z sue SEC for overstepping and rogue enforcement! Seek court ruling that most cryptocurrencies are not securities.