Coinbase to Raise $2B as Revenue and Share Price Falls

Coinbase, the biggest crypto exchange in the U.S., is looking to raise capital to improve its finances. The move comes after the company reported lower revenue in the second quarter and saw its stock fall by 15%. 

The company, which recently released an unusual campaign, now plans to raise $2 billion by offering special bonds that can later be turned into shares. This aims to boost its balance sheet and prepare for future growth.

Coinbase Announces Convertible Notes Offering

On August 5, Coinbase revealed its intention to raise $2 billion through a private sale of convertible senior notes, a common practice in the crypto industry. These notes will mature in two parts, with $1 billion due in 2029 and another $1 billion due in 2032. 

Investors will also have the option to buy an additional $300 million worth of notes across both series. As announced, these notes are only available to qualified institutional buyers under Rule 144A. 

They are unsecured and will pay interest twice a year. It can also be converted into cash, Coinbase Class A shares, or a mix of both, depending on what the company decides. 

Coinbase may also choose to redeem these notes early, based on certain terms. Final interest rates and conversion prices will be set at the time of pricing.

Plans to Limit Share Dilution with Capped Calls

Coinbase, with an over $100 billion market cap, plans to enter into capped call transactions to reduce the impact of dilution from this fundraising effort. These will help limit the number of new shares created if the notes are converted. This approach can also offset cash payments if the share price rises above a set threshold.

The banks or firms involved in these transactions may also trade Coinbase stock and related products to manage their risk. Furthermore, the exchange said it will use part of the money to pay for capped call deals, which help limit how many new shares are made later. 

The rest will be used for general business needs or to pay off some of the company’s debt. Potential targets for repurchase include various convertible and senior notes due between 2026 and 2031.

Earnings Decline Pushes Stock Down

Just days before the announcement, Coinbase released its second-quarter earnings, showing a decline in revenue and a rise in expenses. This news caused COIN shares to fall by 15% on August 4. Initially, the stock was trading at $308, down over 2% from the previous close.

Despite the weaker quarter, some analysts remain optimistic. Along with its funding plans, Coinbase is also buying more Bitcoin (BTC). 

In the second quarter, it bought 2,509 BTC, worth about $222 million at the time. This brings its total to 11,776 BTC, putting it back in the top 10 among public companies holding Bitcoin, just ahead of Tesla.