As the largest encrypted currency exchange in the United States,CoinbaseIt is planned to raise up to $2 billion in debt once again, following the publication of an unsatisfactory financial report. The issue was addressed only to eligible institutional investors, including US$ 1 billion in converted priority instruments due in 2029 and another US$ 1 billion due in 2032.
The company indicated that the funds raised would be used for general business purposes, such as investment and acquisition of other companies, repurchase of shares and repayment of previously issued debt. However, in its second-quarter financial report, Coinbase showed a 25 per cent decrease in revenue from the previous quarter, lower than the 6 per cent expected by analysts. The $1.5 billion in revenues published by the company shows that the volume of transactions is decreasing with the intensification of the “encrypted super-applications war”. As a result of this information, Coinbase ' s share price fell by 10 per cent, with a cumulative decline of 24 per cent since 18 July, when it reached a record high of over $444.
Coinbase had similar debt financing in September 2021, raising $2 billion through the issuance of advanced notes due in 2028 and 2031. It was reported that the round was oversubscribed and that the demand for bonds was at least $7 billion. Coinbase agreed to pay an interest rate of close to 3.4 per cent for the instrument in 2028, while the instrument due in 2031 was slightly above 3.6 per cent. Specific interest rates and terms for the latest round of debt financing will be determined at the time of pricing, but it is almost certain that these rates will be higher than the previous rounds. This is because, for private companies, it is difficult to obtain financing at lower interest rates than before (0-0.25 per cent-0.25 per cent) at the current federal fund rate (4.25-4.5 per cent).
In addition, Coinbase mentioned that these debts would be converted in the form of cash or shares, depending on the company ' s decision. This means that Coinbase may alleviate the debt burden by adding new equity issues before the maturity of the instrument. Investors are usually cautious about new equity increases, as this dilutes their ownership and may have a negative impact on equity prices. In order to address this problem, Coinbase expects to place an end-of-term right to trade on the debt to be sold, with the aim of reducing the number of new equity issues at the time of future debt swaps.