Marathon Digital Holdings, Inc. Announces Proposed Private Offering of $250 Million of Convertible Senior Notes

Rhea-AI Summary

Marathon Digital Holdings (NASDAQ: MARA) has announced plans to offer $250 million in convertible senior notes due 2031 to qualified institutional buyers. The company may grant initial purchasers an option for an additional $37.5 million. The notes will be unsecured, senior obligations with semi-annual interest payments and will mature on September 1, 2031. MARA can redeem the notes after September 6, 2028, while holders can require repurchase on March 1, 2029. The notes will be convertible into cash, MARA common stock, or a combination. Proceeds will be used to acquire bitcoin and for general corporate purposes.

Positive

• Potential to raise up to $287.5 million in capital
• Flexibility in note conversion options (cash, stock, or combination)
• Extended maturity date until September 1, 2031
• Proceeds to be used for bitcoin acquisition and strategic purposes

Negative

• Potential dilution of existing shareholders if notes are converted to stock
• Increased debt obligations for the company
• Interest payments may impact cash flow

Financial Analyst

Marathon Digital's proposed $250 million convertible senior notes offering is a strategic move to bolster its bitcoin acquisition capabilities and financial flexibility. The 7-year maturity and potential for additional $37.5 million issuance indicate confidence in long-term growth. However, investors should note the dilutive potential if converted to common stock. The option for cash redemption after 2028 and investor repurchase rights in 2029 provide safeguards. The use of proceeds for bitcoin acquisition aligns with MARA's core business but carries inherent volatility risks. This offering could significantly impact MARA's capital structure and future financial performance, making it a important development for investors to monitor.

Cryptocurrency Expert

MARA's decision to raise capital for bitcoin acquisition is a bold bet on the cryptocurrency's future. This move could potentially amplify returns if bitcoin appreciates, but also magnifies downside risk in a bearish market. The timing is interesting, coming after bitcoin's recent price consolidation. By using convertible notes, MARA is essentially leveraging investor faith in both the company and bitcoin's prospects. This strategy could position MARA as a proxy for institutional bitcoin exposure, potentially attracting investors who seek crypto exposure through traditional securities. However, the success of this approach heavily depends on bitcoin's price trajectory and MARA's operational efficiency in managing its growing digital assets.

Corporate Finance Specialist

The structure of MARA's convertible note offering is noteworthy for its flexibility. The conversion option provides upside potential for noteholders, while the company retains the choice of settlement method. The redemption and repurchase provisions offer balance between company control and investor protection. However, the potential dilution from conversion could concern existing shareholders. The use of proceeds for bitcoin acquisition and general corporate purposes suggests a dual strategy of asset accumulation and operational enhancement. This could improve MARA's competitive position but also increases its risk profile. The offering's success will likely hinge on investor appetite for crypto-linked securities and MARA's perceived growth prospects in the evolving digital asset landscape.

Proceeds to be used primarily to acquire bitcoin and for general corporate purposes

Fort Lauderdale, FL, Aug. 12, 2024 (GLOBE NEWSWIRE) -- Marathon Digital Holdings, Inc. (NASDAQ: MARA) (“MARA” or the “Company”), a global leader in leveraging digital asset compute to support the energy transformation, today announced that it intends to offer, subject to market conditions and other factors, $250 million aggregate principal amount of convertible senior notes due 2031 (the “notes”) in a private offering to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). MARA also expects to grant to the initial purchasers of the notes an option to purchase, within a 13-day period beginning on, and including, the date on which the notes are first issued, up to an additional $37.5 million aggregate principal amount of the notes. The offering is subject to market and other conditions, and there can be no assurance as to whether, when or on what terms the offering may be completed.

The notes will be unsecured, senior obligations of MARA and will bear interest payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2025. The notes will mature on September 1, 2031, unless earlier repurchased, redeemed or converted in accordance with their terms. Subject to certain conditions, on or after September 6, 2028, MARA may redeem for cash all or any portion of the notes. If MARA redeems fewer than all the outstanding notes, at least $75 million aggregate principal amount of notes must be outstanding and not subject to redemption as of the relevant redemption notice date. Holders of the notes will have the right to require MARA to repurchase for cash all or any portion of their notes on March 1, 2029. The notes will be convertible into cash, shares of MARA’s common stock, or a combination of cash and shares of MARA’s common stock, at MARA’s election. Prior to March 1, 2031, the notes will be convertible only upon the occurrence of certain events and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The interest rate, initial conversion rate, and other terms of the notes will be determined at the time of pricing of the offering.

MARA intends to use the net proceeds from the sale of the notes to acquire additional bitcoin and for general corporate purposes, which may include working capital, strategic acquisitions, expansion of existing assets, and repayment of debt and other outstanding obligations.

The notes will be offered and sold to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act. The offer and sale of the notes and the shares of MARA’s common stock issuable upon conversion of the notes, if any, have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction, and the notes and any such shares may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements. Any offer of the notes will be made only by means of a private offering memorandum.

This press release shall not constitute an offer to sell, or a solicitation of an offer to buy, the notes, nor shall there be any sale of the notes in any state or jurisdiction in which such offer, solicitation or sale would be unlawful under the securities laws of any such state or jurisdiction.

About MARA

MARA (NASDAQ:MARA) is a global leader in digital asset compute that develops and deploys innovative technologies to build a more sustainable and inclusive future. MARA secures the world’s preeminent blockchain ledger and supports the energy transformation by converting clean, stranded, or otherwise underutilized energy into economic value.

Forward-Looking Statements

Statements in this press release about future expectations, plans, and prospects, as well as any other statements regarding matters that are not historical facts, may constitute “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements relating to the completion, size and timing of the offering, the anticipated use of any proceeds from the offering, and the terms of the notes. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including uncertainties related to market conditions and the completion of the offering on the anticipated terms or at all, the other factors discussed in the “Risk Factors” section of MARA’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 28, 2024, as amended on May 24, 2024, the “Risk Factors” section of MARA’s Quarterly Report on Form 10-Q filed with the SEC on August 1, 2024 and the risks described in other filings that MARA may make from time to time with the SEC. Any forward-looking statements contained in this press release speak only as of the date hereof, and MARA specifically disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise, except to the extent required by applicable law.

MARA Company Contact:
Telephone: 800-804-1690
Email: ir@mara.com

FAQ

What is the size of Marathon Digital Holdings' proposed convertible note offering?

Marathon Digital Holdings (MARA) is proposing to offer $250 million in convertible senior notes, with an option for an additional $37.5 million, potentially totaling $287.5 million.

When will the Marathon Digital Holdings (MARA) convertible notes mature?

The convertible senior notes offered by Marathon Digital Holdings (MARA) are set to mature on September 1, 2031, unless earlier repurchased, redeemed, or converted.

How does Marathon Digital Holdings (MARA) plan to use the proceeds from the note offering?

MARA intends to use the net proceeds from the sale of the notes primarily to acquire additional bitcoin and for general corporate purposes, including working capital, strategic acquisitions, and debt repayment.

What are the conversion options for Marathon Digital Holdings' (MARA) proposed convertible notes?

The notes will be convertible into cash, shares of MARA's common stock, or a combination of cash and shares, at MARA's election.