Coinbase, facing repercussions from revenue declines in the first half of the year, announced plans to issue $2 billion in convertible debt to bolster its financial stability.
Coinbase's Capital Raising Plans
On August 5, Coinbase announced the offering of $1 billion in convertible senior notes due 2029 and another $1 billion due 2032, exclusively to qualified institutional buyers under SEC Rule 144A.
The notes include an option for initial purchasers to buy up to $300 million in total and can be converted into cash, stock, or a hybrid at Coinbase's discretion.
Use of Proceeds from the Offering
The company plans to allocate a portion of the proceeds towards capped call transactions designed to mitigate dilution. The remaining funds will be used for general corporate purposes, which may include working capital, acquisitions, or share buybacks.
Recent Financial Performance of the Company
In the second quarter, Coinbase reported $1.5 billion in revenue, a modest year-over-year increase that fell short of analyst expectations, leading to a 15% drop in its stock price.
Transaction revenue amounted to $764 million, below forecasts, while subscription and service income, including stablecoin revenue, grew only 9% to $655.8 million. Additionally, Coinbase's partnership with Circle began to show signs of strain, raising concerns among analysts.
Thus, Coinbase's decision to issue convertible debt stems from a necessity to protect the company from financial risks arising from recent declines in its operational metrics.
