Coinbase Plans $2 Billion Convertible Note Offering

Coinbase, the Nasdaq-listed U.S. crypto exchange, is seeking to raise capital through a private offering of convertible senior notes, following a revenue dip in its second-quarter earnings, which led to a 15% decline in COIN shares on August 4. The company announced its intention to raise $2 billion through these notes, with equal splits between maturities in 2029 and 2032, offering initial purchasers an option to acquire an additional $300 million. The notes will be exclusively available to qualified institutional buyers as per Rule 144A. This move comes after a surge of convertible securities in the crypto sector this summer, as firms like Strategy and MARA have sought balance-sheet flexibility while managing dilution through capped calls. The offering includes $1 billion in senior, unsecured notes due in 2029, and another $1 billion due in 2032. These notes will pay interest semi-annually and may be converted into cash or shares at Coinbase's discretion, with a maturity date of October 1 for both issues. Coinbase retains the right to redeem these notes before maturity, subject to standard conditions. Additionally, Coinbase plans to engage in capped call transactions to minimize potential dilution from conversions, with counterparties allowed to hedge their positions by trading Coinbase stocks and derivatives during pricing and throughout the notes' life. The company indicated that part of the net proceeds will be allocated for capped calls while other funds may cover general corporate needs such as working capital, acquisitions, and repurchasing outstanding securities, including its 0.50% converts due 2026 and 3.375% senior notes due 2028. However, Coinbase did not provide any pricing details or investor interest in its initial announcement. COIN shares were trading at $308, down over 2% prior to the U.S. market opening. In terms of Q2 performance, Coinbase's revenue decline and increased expenses led to a fall in its stock price, though some analysts see this as a buying opportunity. Mizuho noted potential impacts on U.S. stablecoin operations for partner Circle due to narrower margins, which could influence Coinbase's service revenue. Finally, this capital raise could enhance Coinbase’s Bitcoin purchasing capability, as the company announced it acquired 2,509 BTC in Q2, thereby re-entering the top-10 list of public bitcoin treasuries.