Coinbase reveals intention to raise $1.25 billion following direct listing

• Following massive Q1 earnings results of $1.8 billion, Coinbase is looking to raise $1.25 billion.
• The leading crypto exchange reveals the intention to offer senior convertible notes for institutional investors. 
• Despite being the first cryptocurrency company to go public, COIN stock has been tanking and even hit a new all-time low following the recent announcement.

Since its debut on the Nasdaq, Coinbase’s share price has merely collapsed. Given the recent weakness in its stock price, the leading cryptocurrency exchange is looking for a further cash injection.

Coinbase could acquire other firms in the future

Coinbase announced that the company intends to offer $1.25 billion of senior convertible notes due in 2026. The offering would be made available privately only to institutional investors who manage at least $100 million in securities issued by other firms, pursuant to Rule 144A under the Securities Act of 1933. The firm said in a statement:

Coinbase also expects to grant the initial purchasers of the notes a 30-day option to purchase up to an additional $187.5 million principal amount of notes solely to cover over-allotments. The notes will be senior, unsecured obligations of Coinbase, will accrue interest payable semi-annually in arrears and will mature on June 1, 2026, unless earlier repurchased, redeemed or converted.

A senior convertible note is a debt security that can offer investors the ability to earn interest, containing an option that the note can be converted into a predefined amount of the issuer’s shares. 

The new offering comes just over a month after Coinbase announced its Q1 earnings results with total revenue of roughly $1.8 billion, up from around $190 million in the same period last year. 

The leading crypto exchange did not disclose any specific reason behind the vast amount of money it aims to raise. However, it could be possible that it is following in the footsteps of MicroStrategy, which made a similar move by completing a $1 billion offering of Convertible Notes. At the same time, it intended to purchase more Bitcoin as part of its treasury allocation strategy. 

The markets reacted poorly to the announcement, as COIN fell to its all-time low since its April 14 debut under $239. 

While companies are not required to disclose the intention behind the issuance of any given debt offering, Coinbase explained that it was seeking to cover corporate expenses. The crypto exchange added:

Coinbase intends to use the net proceeds from the offering for general corporate purposes, which may include working capital and capital expenditures, and to pay the cost of the capped call transactions.

The US-based firm also added that it might use a portion of the net proceeds to make investments and acquire other companies, products or technologies that the company sees fit in the future. 

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