MARA Holdings, a leading publicly traded Bitcoin mining company, has acquired 6,474 Bitcoin valued at approximately $619 million. This acquisition was facilitated through a $1 billion convertible note offering with a 0% interest rate.
Convertible Notes: A Key to Expanding Bitcoin Holdings
Convertible notes are a form of debt financing where the debt can later be converted into equity. For MARA, these notes are due in 2030 and are issued at a 0% interest rate, making them highly attractive. Approximately $199 million of the proceeds have been used to repurchase existing notes due in 2026, thereby reducing the company's debt load.
MARA’s Growing Bitcoin Reserves and Market Position
MARA now holds approximately 34,794 BTC, valued at about $3.306 billion based on the current Bitcoin price of $95,029 per coin. This aggressive expansion mirrors a broader market trend, as companies like MicroStrategy also use convertible debt to buy cryptocurrency. MicroStrategy recently raised $3 billion through a similar offering, acquiring 55,000 BTC.
Risks and Criticism of Using Convertible Notes
While MARA's strategy of leveraging convertible notes to acquire Bitcoin has been effective so far, it is not without risks. Critics argue that using debt to purchase a volatile asset like Bitcoin could put the company in a difficult financial position if Bitcoin's price drops sharply. For example, MicroStrategy's stock fell by 25% in late November following its convertible note offering.
MARA Holdings' aggressive strategy to increase its Bitcoin reserves has been facilitated by its convertible note issuance. While this approach offers financial benefits, it also brings certain risks associated with the volatility of the cryptocurrency market.
