U.S. cryptocurrency exchange Coinbase plans to raise $1 billion through the issuance of convertible bonds, adopting a strategy similar to that used by Michael Saylor for MicroStrategy to buy Bitcoin.
By issuing convertible notes in a private placement, Coinbase avoided selling equity that would have diluted existing shareholders and potentially hurt the stock price. Holders can convert them into Coinbase stock or cash in 2030.
Saylor’s MicroStrategy, which has also tapped debt markets to raise its bitcoin funds, is now worth about $15 billion. It has raised more than $2 billion in convertible debt in recent years, most recently this month with a $700 million offering of convertible senior notes.
Coinbase announces $1 billion convertible bond issuance
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— HZKE (@HZKE_AI)
March 12, 2024
Coinbase takes extra precautions
Coinbase takes extra precautions to prevent shareholders from being diluted during the conversion, something MicroStrategy did not implement in its recent transactions.
To protect investors, Coinbase will offer “negotiated capped purchase transactions,” a type of hedge to ensure existing shareholders are not diluted.
Coinbase said it will use the funds to repay existing convertible notes and for general corporate purposes, including working capital and capital expenditures, and to pay fees on capped purchase transactions.
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