Crypto exchange Coinbase revealed plans to raise $2 billion through a private offering of convertible senior notes, split equally between two tranches maturing in 2029 and 2032, with an option to increase the sale by $300 million. This follows a challenging Q2 earnings report showing a 25% quarter-on-quarter revenue decline and 15% stock drop last week, with shares falling another 2% to $308 in pre-market trading after the announcement.
The unsecured notes will be offered to qualified institutional buyers under Rule 144A, paying semiannual interest and convertible into cash, Coinbase Class A shares, or a combination. To limit equity dilution, Coinbase will enter capped call transactions tied to each tranche. Proceeds will fund these hedges and cover general corporate expenses including potential acquisitions, capital expenditures, and debt repurchases - notably its 0.50% notes due 2026 and senior notes maturing between 2028-2031.
Despite revenue pressures from tighter margins on its USDC partnership with Circle, Coinbase significantly expanded its Bitcoin reserves during Q2, acquiring 2,509 BTC worth $222 million. This brings its total holdings to 11,776 BTC - surpassing Tesla to rank among the top 10 public company Bitcoin holders. If completed, this would mark the first instance of an S&P 500 company potentially using convertible debt proceeds for Bitcoin purchases.
Analysts remain divided: Benchmark views the stock dip as a buying opportunity citing long-term tailwinds, while Mizuho expressed concern over service revenue impacts. The move echoes Coinbase's $1 billion convertible notes offering in March 2023, which facilitated its $2.9 billion acquisition of Deribit.