Coinbase, the biggest US-based crypto exchange, plans to raise another $2 billion worth of debt days after posting a lacklustre earnings report.
The offering, which is only open to qualified institutional buyers, comprises $1 billion of so-called Convertible Senior Notes due in 2029, and another $1 billion of notes due in 2032.
The firm says it will use the funds raised for general corporate purposes, such as investments in and acquisitions of other companies, and to buy back shares and previously issued debt.
It comes as Coinbase’s second quarter earnings report revealed a 25% drop in income from the previous quarter, 6% below analysts’ expectations.
Coinbase shares dropped 10% on the news, adding to a 24% drawdown since the stock hit an all-time high of above $444 on July 18.
Coinbase declined a request for comment.
Higher rates
Coinbase conducted a similar debt offering in September 2021, raising $2 billion by issuing senior notes due in 2028 and 2031.
The round was oversubscribed, with at least $7 billion in offers for the bonds, Bloomberg News reported at the time.
Coinbase agreed to pay just under a 3.4% interest rate on the 2028 notes and slightly over a 3.6% rate on those due in 2031.
The interest rates and terms for the latest debt raise will be determined upon pricing of the offering, the firm said.
But the rates will almost certainly be higher than the previous offering. That’s because it’s uncommon for private companies to raise debt at a lower interest rate than the US federal funds rate, which currently sits at 4.25% and 4.5% compared to the 0% to 0.25% rate during Coinbase’s previous debt offering.
Issuing shares
Coinbase said the debt will be convertible into cash or shares at the firm’s discretion. This means that Coinbase could issue more shares between the offering and when the notes expire to reduce its debt burden.
Investors are often wary of firms issuing more shares as it dilutes their ownership and can negatively impact share price.
Coinbase said it expects to attach capped call transactions to the debt that it sells, which the firm says should reduce the issuance of new shares from any future debt conversion.
Coinbase shares are down 2.5% on the day.
