-
Coinbase
plans
to
raise
$1
billion
through
a
convertible
debt
offering,
following
the
path
of
Michael
Saylor’s
MicroStrategy. -
The
offering
has
an
extra
provision,
“negotiated
capped
call
transactions,”
which
will
ensure
less
dilution
at
the
conversion. -
The
raise
comes
after
Wall
Street
analysts
threw
in
the
towel
on
their
bearish
stance
on
the
stock.
-
06:39
Why
Sequoia
Capital
Is
Raising
$600M
to
Launch
New
Crypto
Fund -
06:14
Twitter
Joined
$20M
Funding
Round
for
Bitcoin
Payments
Provider
OpenNode -
06:14
Twitter
Joined
$20M
Funding
Round
for
Bitcoin
Payments
Provider
OpenNode -
06:55
Polygon
Raises
$450M
to
Build
Web
3
Applications,
Invest
in
Zero-knowledge
Tech
The
only
publicly
traded
cryptocurrency
exchange
in
the
U.S.,
Coinbase
(COIN),
announced
a
plan
to
cash
in
on
the
recent
rally
in
digital
assets
by
raising
$1
billion
through
selling
convertible
bonds,
avoiding
an
equity
sale
that
could
hurt
its
stock
price
and
also
following
the
path
Michael
Saylor’s
MicroStrategy
has
taken
to
fund
its
crypto
aspirations.
Coinbase
said
on
Tuesday
that
it
will
offer
the
unsecured
convertible
senior
notes
via
a
private
offering.
Convertible
bonds
can
be
turned
into
shares
of
the
issuing
company
(or
cash)
at
a
certain
point.
For
the
notes
Coinbase
plans
to
offer,
that
conversion
year
is
2030.
Had
the
company
chosen
instead
to
raise
money
by
selling
new
Coinbase
shares,
that
would
dilute
the
ownership
interest
of
existing
shareholders
–
something
investors
may
view
unfavorably.
By
tapping
the
debt
market
to
fund
its
crypto
business,
Coinbase
is
pursuing
a
strategy
Saylor
has
pursued
at
MicroStrategy
over
the
past
few
years.
Saylor’s
company
has
purchased
205,000
bitcoin,
which
are
now
worth
nearly
$15
billion,
much
of
which
is
funded
by
MicroStrategy’s
sale
of
more
than
$2
billion
of
convertible
notes.
Just
this
month,
MicroStrategy
sold
$700
million
of
them,
and
there
was
enough
demand
that
the
company
could
sell
more
than
the
originally
anticipated
$600
million.
Coinbase
is
taking
an
extra
step
to
reduce
the
dilution
when
its
debt
is
converted
into
equity
by
offering
“negotiated
capped
call
transactions”
–
essentially
a
hedge
to
prevent
dilution
during
the
conversion
of
notes.
(MicroStrategy
did
not
include
such
a
provision
in
its
most
recent
deal.)
Issuers
use
these
hedges
with
convertible
debt
to
prevent
dilution
to
existing
shareholders,
even
when
their
share
price
rises
above
the
conversion
price,
though
they
have
to
pay
a
fee.
During
its
breakneck
rally,
fitness
company
Peloton
famously
raised
$1
billion
in
convertible
debts
in
2021,
including
a
capped
call
option.
“The
capped
call
transactions
will
cover,
subject
to
customary
adjustments,
the
number
of
shares
of
Coinbase’s
Class
A
common
stock
that
will
initially
underlie
the
notes,”
Coinbase
said.
The
move
comes
after
a
massive
rally
in
bitcoin,
which
has
taken
the
price
of
the
digital
asset
to
an
all-time
high
above
$73,000.
Bitcoin
is
up
67%
this
year,
while
Coinbase’s
stock
soared
by
48%
in
the
same
time
period.
Publicly
traded
companies
often
take
advantage
of
bull
markets
by
raising
money
by
selling
new
securities
such
as
equity,
convertible
notes,
etc.
Coinbase
said
it
may
use
proceeds
from
its
transaction
to
repay
debt,
pay
for
potential
capped
call
transactions
and
possibly
to
acquire
other
companies.
Coinbase’s
$1
billion
offering
comes
after
some
Wall
Street
analysts
ditched
their
bearish
stance
on
the
stock.
Raymond
James
and
Goldman
Sachs
are
bears
that
have
upgraded
the
stock,
citing
the
massive
rally
in
the
digital
asset
markets.
