Coinbase Could Be First S&P 500 Company to Buy Bitcoin for $2 Billion
Coinbase is preparing to raise $2 billion through a private placement of convertible bonds that will potentially buy Bitcoin. If confirmed, this would make Coinbase the first S&P 500 company to purchase Bitcoin using funds from a bond offering.
Despite Coinbase's revenue falling in Q2, the Nasdaq-listed US-based cryptocurrency exchange is now turning to the capital markets to raise funds.
Coinbase connects traditional and crypto markets
Coinbase, one of the world’s largest cryptocurrency exchanges, revealed Tuesday that it plans to raise $2 billion through a special type of bond called a convertible senior note. The bond is only offered to large institutional investors. The offering includes $1 billion of bonds maturing in 2029 and another $1 billion maturing in 2032.
The bonds will be unsecured and will pay interest twice a year, according to the company. The final interest rate and terms for converting the bonds into Coinbase shares will be determined after the pricing is finalized.
Additionally, Coinbase said it may offer investors the opportunity to purchase up to an additional $150 million of each bond, both the 2029 and 2032 versions, if demand is strong.
Coinbase plans to enter into capped call options transactions to minimize dilution if its new convertible notes are converted into stock. These transactions could also help offset cash payments that exceed the principal amount of the notes.
Counterparties will be able to trade Coinbase shares and derivatives to manage risk, the company said. A portion of the proceeds will be used for these capped call options, while the rest may be used for general expenses, acquisitions or repayment of existing debt, including previous bond offerings due between 2026 and 2031.
This could include the repayment of the 0.50% convertible notes due in 2026, the 3.375% senior notes due in 2028, the 3.625% notes due in 2031 and the 0.25% convertible notes due in 2030.
Coinbase Tracks Strategy and MARA
Coinbase’s fundraising comes amid a flurry of crypto companies using convertible bonds to raise capital. Other big names like MicroStrategy and Marathon Digital (MARA) have recently done the same, aiming to increase financial flexibility and limit stock dilution with capped call strategies.
MicroStrategy, led by Michael Saylor and known as the largest Bitcoin holder, has helped popularize this method. The company frequently uses stock offerings to fund its Bitcoin purchases.
On July 21, MicroStrategy issued an IPO of 5 million new aggregate shares that include cumulative dividends and are expected to trade around par value of $100 per share.
Just a week earlier, on July 14, crypto asset management firm Grayscale filed a confidential IPO application with the United States Securities and Exchange Commission (SEC), a move toward launching the company’s own public offering in the near future.