Coinbase Announces Pricing of Upsized Offering of $1.1 Billion of 0.25% Convertible Senior Notes Due 2030

Rhea-AI Summary

Coinbase Global, Inc. announced the pricing of $1.1 billion aggregate principal amount of Convertible Senior Notes due 2030 in a private offering to qualified institutional buyers. The offering size was increased from $1.0 billion, with potential net proceeds of $1.08 billion to $1.24 billion. Coinbase plans to use the funds for debt repayment, general corporate purposes, capped call transactions, and potential investments or acquisitions. The notes will bear interest at 0.25% per year and mature on April 1, 2030, with conversion rights at an initial rate of 2.9981 shares per $1,000 principal amount of notes.

Insights

Financial Analyst

The recent announcement by Coinbase regarding the pricing of $1.1 billion in Convertible Senior Notes due 2030 marks a significant financing event for the company. The decision to increase the offering from $1.0 billion to $1.1 billion, with an additional option for initial purchasers to buy up to $165.0 million more to cover over-allotments, reflects strong demand and potentially positive market sentiment towards Coinbase's financial health and future prospects.

The use of proceeds to manage existing debt obligations, such as the repayment or repurchase of outstanding notes due in 2026, 2028 and 2031, illustrates a proactive approach to capital structure management. This could be seen as a strategic move to improve the company's debt maturity profile and reduce interest expenses, as the new notes have a lower interest rate compared to some of the existing notes.

Investors should consider the impact of these convertible notes on potential dilution of existing shares, although the capped call transactions are designed to mitigate this effect to some extent. The initial conversion price represents a 32.5% premium over the recent share price, which may be attractive to investors if they are bullish on the company's stock performance.

Market Research Analyst

Convertible notes are a hybrid financial instrument offering both debt and equity features, which can be appealing to investors seeking both fixed income and potential upside in the company's equity. The low interest rate of 0.25% per year on the notes indicates investor confidence in Coinbase's creditworthiness and future profitability.

The capped call transactions, which are intended to reduce potential equity dilution and cash payment obligations upon conversion, are noteworthy as they reflect Coinbase's efforts to manage its share price volatility and protect against excessive dilution. The initial cap price of approximately $503.46 per share is double the last reported sale price of Coinbase's Class A common stock, suggesting an optimistic outlook on the company's value growth.

The market's reaction to these transactions, particularly the potential share price impact from the option counterparties' hedging activities, should be monitored closely. The derivative transactions and secondary market activities by these counterparties could influence Coinbase's stock price, affecting not only the conversion attractiveness but also investor perception of the company's market stability.

Legal Expert

It is important to note the regulatory framework within which this offering is taking place. The notes are being offered pursuant to Rule 144A under the Securities Act of 1933, which allows for the sale of securities to qualified institutional buyers without the need for a public offering. This private offering nature limits the pool of potential investors but also simplifies the regulatory compliance requirements for Coinbase.

Furthermore, the fact that the notes and any shares of Class A common stock potentially issuable upon conversion have not been registered under the Securities Act highlights the importance of adhering to exemptions from registration requirements. Investors need to be aware that the resale of these securities may be restricted, which could affect their liquidity and marketability.

Lastly, the redemption features and the fundamental change repurchase rights provide Coinbase with flexibility in managing its debt while giving investors protection against significant corporate events that could adversely affect the value of their investment.

Remote-First-Company/SANTA FE, N.M.--(BUSINESS WIRE)-- Coinbase Global, Inc. (“Coinbase”) (Nasdaq: COIN) today announced the pricing of $1.1 billion aggregate principal amount of Convertible Senior Notes due 2030 (the “notes”) in a private offering (the “offering”) to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The aggregate principal amount of the offering was increased from the previously announced offering size of $1.0 billion. Coinbase also granted the initial purchasers of the notes a 30-day option to purchase up to an additional $165.0 million principal amount of notes, solely to cover over-allotments. The sale of the notes to the initial purchasers is expected to settle on March 18, 2024, subject to customary closing conditions, and is expected to result in approximately $1.08 billion (or approximately $1.24 billion if the initial purchasers exercise their option to purchase additional notes in full) in net proceeds to Coinbase after deducting the initial purchasers’ discounts and commissions and estimated offering expenses payable by Coinbase.

Coinbase intends to use the net proceeds from the offering to repay at maturity, or repurchase or redeem prior to maturity, from time to time and subject to market conditions, its outstanding 0.50% Convertible Senior Notes due 2026, 3.375% Senior Notes due 2028, and 3.625% Senior Notes due 2031 and for other general corporate purposes, which may include working capital and capital expenditures, and to pay the cost of the capped call transactions. If the initial purchasers exercise their option to purchase additional notes, Coinbase expects to use a portion of the net proceeds from the sale of such additional notes to enter into additional capped call transactions. Coinbase may also use a portion of the net proceeds to make investments in and acquisitions of other companies, products or technologies that Coinbase may identify from time to time.

The notes will be senior, unsecured obligations of Coinbase. The notes will bear interest of 0.25% per year payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2024. The notes will mature on April 1, 2030, unless earlier repurchased, redeemed or converted. Coinbase may not redeem the notes prior to April 1, 2027. Coinbase may redeem all or any portion of the notes (subject to certain limitations), at its option, on or after April 1, 2027 and on or before the 20th scheduled trading day immediately before the maturity date, if the last reported sale price of Coinbase’s Class A common stock exceeds 130% of the conversion price then in effect on (1) each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately before the date Coinbase sends the related redemption notice; and (2) the trading day immediately before the date Coinbase sends such notice, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the notes, which means that Coinbase is not required to redeem or retire the notes periodically. Subject to a limited exception, holders of the notes will have the right to require Coinbase to repurchase for cash all or a portion of their notes upon the occurrence of a fundamental change (as defined in the indenture governing the notes) at a purchase price of 100% of their principal amount plus any accrued and unpaid interest.

The notes will be convertible at an initial conversion rate of 2.9981 shares of Coinbase’s Class A common stock, per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $333.54 per share of Class A common stock, which represents a conversion premium of approximately 32.5% to the last reported sale price of $251.73 per share of Coinbase’s Class A common stock on The Nasdaq Global Select Market on March 13, 2024).

Prior to the close of business on the business day immediately preceding October 1, 2029, the notes will be convertible at the option of the noteholders only upon the satisfaction of specified conditions and during certain periods. On or after October 1, 2029 until the close of business on the second scheduled trading day preceding the maturity date, the notes will be convertible at the option of the noteholders at any time regardless of these conditions. Conversions of the notes will be settled in cash, shares of Coinbase’s Class A common stock, or a combination thereof, at Coinbase’s election.

In connection with the pricing of the notes, Coinbase entered into privately negotiated capped call transactions with certain of the initial purchasers or their affiliates and/or other financial institutions (the “option counterparties”). The capped call transactions cover, subject to customary adjustments, the number of shares of Coinbase’s Class A common stock that will initially underlie the notes. The capped call transactions are expected generally to reduce the potential dilution to Coinbase’s Class A common stock upon any conversion of the notes and/or offset any potential cash payments Coinbase is required to make in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap. The cap price of the capped call transactions is initially approximately $503.46 per share, which represents a premium of 100% over the last reported sale price of Coinbase’s Class A common stock of $251.73 per share on March 13, 2024, and is subject to certain adjustments under the terms of the capped call transactions.

Coinbase has been advised that, in connection with establishing their initial hedges of the capped call transactions, the option counterparties or their respective affiliates expect to enter into various derivative transactions with respect to Coinbase’s Class A common stock and/or purchase shares of Coinbase’s Class A common stock concurrently with or shortly after the pricing of the notes. This activity could increase (or reduce the size of any decrease in) the market price of Coinbase’s Class A common stock or the notes at that time. In addition, Coinbase has been advised that the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to Coinbase’s Class A common stock and/or purchasing or selling Coinbase’s Class A common stock or other securities of Coinbase in secondary market transactions following the pricing of the notes and from time to time prior to the maturity of the notes (and are likely to do so during the relevant valuation period under the capped call transactions or following any early conversion of the notes, any repurchase of the notes by Coinbase on any fundamental change repurchase date, any redemption date or any other date on which the notes are retired by Coinbase, in each case if Coinbase exercises its option to terminate the relevant portion of the capped call transactions). This activity could also cause or avoid an increase or a decrease in the market price of Coinbase’s Class A common stock or the notes, which could affect the ability of noteholders to convert the notes and, to the extent the activity occurs during any observation period related to a conversion of the notes, it could affect the number of shares of Class A common stock, if any, and value of the consideration that noteholders will receive upon conversion of the notes.

The notes were only offered and sold to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A promulgated under the Securities Act by means of a private offering memorandum. Neither the notes nor the shares of Coinbase’s Class A common stock potentially issuable upon conversion of the notes, if any, have been, or will be, registered under the Securities Act or the securities laws of any other jurisdiction, and unless so registered, may not be offered or sold in the United States, except pursuant to an applicable exemption from such registration requirements.

This announcement is neither an offer to sell nor a solicitation of an offer to buy any of the notes or any shares of Class A common stock potentially issuable upon conversion of the notes and shall not constitute an offer, solicitation, or sale in any jurisdiction in which such offer, solicitation, or sale is unlawful.

About Coinbase

Crypto creates economic freedom by ensuring that people can participate fairly in the economy, and Coinbase (NASDAQ: COIN) is on a mission to increase economic freedom for more than 1 billion people. We’re updating the century-old financial system by providing a trusted platform that makes it easy for people and institutions to engage with crypto assets, including trading, staking, safekeeping, spending, and fast, free global transfers. We also provide critical infrastructure for onchain activity and support builders who share our vision that onchain is the new online. And together with the crypto community, we advocate for responsible rules to make the benefits of crypto available around the world.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains “forward-looking statements” including, among other things, statements relating to the completion of the offering, the potential effects of entering into capped call transactions, and the expected use of proceeds from the offering. Statements containing words such as “could,” “believe,” “expect,” “intend,” “will,” or similar expressions constitute forward-looking statements. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially, including, but not limited to, whether or not Coinbase will consummate the offering, prevailing market conditions, the anticipated use of the net proceeds of the offering, which could change as a result of market conditions or for other reasons, the impact of general economic, industry or political conditions in the United States or internationally, and whether the capped call transactions will become effective. The foregoing list of risks and uncertainties is illustrative, but is not exhaustive. For information about other potential factors that could affect Coinbase’s business and financial results, please review the “Risk Factors” described in Coinbase’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) and in Coinbase’s other filings with the SEC. Except as may be required by law, Coinbase undertakes no obligation, and does not intend, to update these forward-looking statements after the date of this release.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240313516156/en/

Press: press@coinbase.com

Investors: investor@coinbase.com

Source: Coinbase Global, Inc.

FAQ

What is the total principal amount of Convertible Senior Notes due 2030 offered by Coinbase in the private offering?

Coinbase offered $1.1 billion aggregate principal amount of Convertible Senior Notes due 2030 in the private offering.

What is the purpose of the net proceeds from the offering for Coinbase?

Coinbase intends to use the net proceeds for debt repayment, general corporate purposes, capped call transactions, and potential investments or acquisitions.

What is the interest rate on the Convertible Senior Notes due 2030?

The notes will bear interest at 0.25% per year payable semi-annually.

When will the notes mature?

The notes will mature on April 1, 2030, unless earlier repurchased, redeemed, or converted.

What is the initial conversion rate for the Convertible Senior Notes due 2030?

The initial conversion rate is 2.9981 shares of Coinbase's Class A common stock per $1,000 principal amount of notes.