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Coinbase Sells $1 Billion in Bonds as the Company’s Stock Soars

Coinbase Sells $1 Billion in Bonds as the Company’s Stock Soars

The notes, which mature in 2030, will be convertible into cash, A-shares of the company’s stock, or a combination.

Dillon Newman
March 13, 2024 • Estimated Reading Time: 3 minutes

With the company’s stock up more than 300% this year, Coinbase (COIN) is taking advantage of the moment by selling $1 billion in convertible notes to pay off existing debts and cover corporate costs.

Coinbase also plans to offer a 30-day option to allow the purchase of an additional $150 million of the securities to cover over-allotments.

The notes, which mature in 2030, will be convertible into cash, A-shares of the company’s stock, or a combination.

Flashback to One Year Ago

Savvy readers will remember that we first discussed publicly-traded crypto company bonds in January, 2023.

At that time, Coinbase was left for dead by the ratings agencies, and it’s bonds were trading in junk territory. We wrote:

While the FTX fiasco probably led to an increase in accounts at Coinbase, helping solidify their footing in the US market, the ratings’ agencies aren’t yet buying it.

Currently, Coinbase’s bonds maturing in ‘26, ‘28, and ‘31 are all yielding more than 10% (junk bond territory).

Not helping the company are rating agencies, Moody’s and S&P Global, downgrading the company’s credit. So while equity holders appear to be bullish on the company, the bond market isn’t so sure.

https://www.coinsnacks.com/p/csx-backdoor

Furthermore, we explained that if you assumed Coinbase wasn’t going to go bankrupt, the trade looked pretty sweet.

As of the end of Q3 2022, Coinbase had ~$5 billion in cash on hand and $3.4 billion of long-term debt.

If we briefly look at the 3.38% Senior Notes due on October 1, 2028, we can see that Coinbase raised $1 billion of these bonds that pay 3.38% interest until 2028.

Right now, these bonds are trading for $0.58 on the dollar, and have been as low as $0.50.

Due to the discount, if you do the math, these bonds are paying ~14% yield. In other words, if you hold these bonds to maturity (five years), you will receive 14% annually. Not bad.

While that trade turned out pretty good, our main point is that you don’t have to go chasing crazy tokens to make respectable money in crypto. Find an area of the market you understand and trade with conviction.

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