Coinbase Announces Proposed Private Offering of $1.0 Billion of Convertible Senior Notes Due 2030

Rhea-AI Summary

Coinbase Global, Inc. announces a private offering of $1.0 billion Convertible Senior Notes due 2030, with additional $150.0 million option. The notes will be convertible into cash, shares of Coinbase's Class A common stock, or a combination thereof. Coinbase intends to use the proceeds for debt repayment, general corporate purposes, and potential investments or acquisitions.

Insights

Financial Analyst

Convertible senior notes are a form of debt financing that can be converted into equity, typically common stock, at the discretion of the bondholder or under specific conditions. The issuance of $1.0 billion in convertible notes by Coinbase is a strategic move to manage its debt profile by potentially reducing the interest expense and extending the maturity of its obligations. The additional option to purchase up to $150 million to cover over-allotments indicates a buffer for higher demand, which can be a positive signal to the market.

Moreover, the decision to enter into capped call transactions is a hedge against dilution for existing shareholders. It suggests that Coinbase is proactively managing the potential equity impact of the conversion feature. This can be beneficial for the stock price as it provides a level of predictability and stability. The market's reaction to such financial instruments often depends on the terms of the conversion and the perceived future growth of the company. A high conversion premium could indicate confidence in the company's prospects, while a low premium might suggest the opposite.

Investors and analysts will closely monitor the interest rate and conversion rate set upon pricing, as these will affect the level of dilution and the cost of capital for Coinbase. The implied volatility of Coinbase's stock, as well as the broader cryptocurrency market conditions, will be key factors in determining these rates.

Market Research Analyst

The cryptocurrency market is known for its volatility, which impacts companies like Coinbase directly. The offering of convertible notes may be seen as a move to strengthen the company's balance sheet against such volatility. By repaying or repurchasing existing notes, Coinbase is likely aiming to optimize its capital structure and interest expenses in anticipation of future market conditions.

Investors will be interested in how these financial maneuvers correlate with Coinbase's operational strategies, such as investments in or acquisitions of other companies. Such activities could signal Coinbase's commitment to expanding its business model or entering new markets. The potential dilution from the conversion of these notes is a concern for current shareholders, but the capped call transactions aim to mitigate this impact.

Lastly, the secondary market activities of the option counterparties could influence Coinbase's stock price. Investors should consider the potential implications of these transactions on stock price volatility and conversion decisions.

Legal Expert

The offering is being made to qualified institutional buyers in compliance with Rule 144A under the Securities Act, which allows for the sale of securities to sophisticated investors without the need for a public offering. This private placement nature limits the pool of potential investors but also simplifies the regulatory requirements and speeds up the process.

It's important to note that the notes and any shares issued upon conversion have not been registered under the Securities Act, hence they are subject to restrictions on resale. The legal framework surrounding convertible notes is complex and the potential for legal challenges exists, particularly in scenarios where noteholders may dispute the terms of conversion or if there are allegations of market manipulation through the derivative transactions by the option counterparties.

The language of the announcement indicates caution, emphasizing that this is not an offer to sell or a solicitation of an offer to buy, which is standard to avoid contravening securities regulations.

Remote-First-Company/PORTLAND, Ore.--(BUSINESS WIRE)-- Coinbase Global, Inc. (“Coinbase”) (Nasdaq: COIN) today announced its intention to offer, subject to market conditions and other factors, $1.0 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”). Coinbase also expects to grant the initial purchasers of the notes a 30-day option to purchase up to an additional $150.0 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 April 1, 2030, unless earlier repurchased, redeemed or converted. The notes will be convertible into cash, shares of Coinbase’s Class A common stock, or a combination thereof, at Coinbase’s election. The interest rate, initial conversion rate, and other terms of the notes are to be determined upon pricing of the offering.

In connection with the pricing of the notes, Coinbase expects to enter into privately negotiated capped call transactions with one or more of the initial purchasers or their affiliates and/or other financial institutions (the “option counterparties”). The capped call transactions will 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.

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.

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 only be 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, timing, and size of the proposed offering, the granting of a 30-day option to purchase additional notes, the potential effects of 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 offer the notes or consummate the offering, the final terms of the offering, prevailing market conditions, the anticipated principal amount of the notes, which could differ based upon 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/20240312795400/en/

Press: press@coinbase.com

Investors: investor@coinbase.com

Source: Coinbase Global, Inc.

FAQ

What is Coinbase Global, Inc. announcing in the press release?

Coinbase is announcing a private offering of $1.0 billion Convertible Senior Notes due 2030, with an additional $150.0 million option.

How will the notes be convertible?

The notes will be convertible into cash, shares of Coinbase's Class A common stock, or a combination thereof at Coinbase's election.

What does Coinbase plan to do with the net proceeds from the offering?

Coinbase intends to use the net proceeds to repay existing debts, for general corporate purposes, potential investments or acquisitions, and to cover the cost of the capped call transactions.

Who can participate in the offering of the notes?

The notes will be offered and sold to qualified institutional buyers pursuant to Rule 144A under the Securities Act in a private offering.

Are the notes or shares of Coinbase's Class A common stock registered under the Securities Act?

Neither the notes nor the shares potentially issuable upon conversion have been registered under the Securities Act or any other jurisdiction's securities laws.