Coinbase issues $1 billion in convertible corporate bonds! Will you follow the micro strategy and buy Bitcoin?

US cryptocurrency exchange Coinbase announced today that it plans to raise $1 billion through the issuance of convertible corporate bonds to avoid an equity sale that might have an impact on its stock price. The move by Coinbase is similar to that of MicroStrategy, which has received financial backing for its vision in the cryptocurrency space.

Avoid selling new shares to dilute shareholder ratio

Coinbase plans to issue senior unsecured convertible bonds through a private placement with a deadline of 2030. These convertible bonds are conditionally convertible into company stock or cash. Choosing a private placement rather than selling new shares to raise capital helps avoid diluting existing shareholders, which may be welcomed by investors. Private placements of convertible bonds offer a flexible way to raise capital and provide dual benefits to companies and investors. This approach can help Coinbase meet its capital needs while reducing the impact on existing shareholders, helping to maintain the stability of the company's shareholder structure.

Coindesk reported that by using the bond market to raise funds for its cryptocurrency business, Coinbase is following the strategy pursued by MicroStrategy over the past few years, which has purchased 205,000 Bitcoins currently worth nearly $15 billion. Most of the purchases were funded by more than $2 billion in convertible bonds sold by MicroStrategy.

It is understood that MicroStrategy recently revealed that they have invested US$820 million to purchase 12,000 Bitcoins. The funding was obtained through MicroStrategy's issuance of US$800 million in senior convertible corporate bonds and private placement financing to qualified institutional investors.

Will repay debt and use it for acquisitions

Bitcoin’s price has risen 67% this year, and Coinbase’s stock price has also increased by 63% as the cryptocurrency market has strengthened. Publicly traded companies often take advantage of such opportunities in bull markets to raise capital by issuing new securities, such as stocks or convertible bonds. This method of financing can help a company expand its business or make more investments, thereby further driving its growth. Against the background of the booming cryptocurrency market, investors are more optimistic about companies like Coinbase and are more willing to invest in such companies. Coinbase said they consider using the income earned to repay debts, pay out possible The capped subscription transaction fees may also be used to invest in or acquire other companies, products or technologies.

Note: Coinbase reduces dilution when debt is converted into equity by offering "negotiated capped call option transactions" (negotiated capped call option transactions), which is essentially a hedge in case of a bond conversion period. , existing shareholders’ equity was diluted.

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