Marathon Digital Holdings, Inc. Completes $300 Million Offering of 2.125% Convertible Senior Notes Due 2031, Purchases $249 Million of Bitcoin

Rhea-AI Summary

Marathon Digital Holdings (NASDAQ: MARA) has successfully completed a $300 million offering of 2.125% convertible senior notes due 2031. The net proceeds from the sale were approximately $292.5 million after deducting initial purchasers' discounts and commissions. Notably, MARA used a portion of these proceeds to acquire approximately 4,144 bitcoin for $249 million at an average price of $59,500 per bitcoin.

The notes, sold to qualified institutional buyers, are unsecured, senior obligations of MARA with a 2.125% annual interest rate. They are convertible into cash, shares of MARA's common stock, or a combination thereof, at MARA's discretion. The initial conversion rate is 52.9451 shares per $1,000 principal amount, equivalent to a conversion price of $18.89 per share.

Positive

• Successful $300 million convertible senior notes offering
• Acquisition of 4,144 bitcoin for $249 million, expanding digital asset holdings
• Low interest rate of 2.125% on the convertible notes
• Flexible conversion options for noteholders
• Additional capital raised for strategic acquisitions and expansion

Negative

• Increased debt obligation with $300 million in convertible notes
• Potential dilution of existing shareholders if notes are converted to common stock
• Exposure to bitcoin price volatility with significant investment

Insights

Financial Analyst

Marathon Digital's $300 million convertible note offering and subsequent $249 million Bitcoin purchase represent significant strategic moves. The 2.125% interest rate is relatively low, indicating strong investor confidence. The conversion price of $18.89 per share, a 30% premium to current trading levels, suggests optimism about MARA's future performance. The Bitcoin acquisition at $59,500 per coin demonstrates the company's bullish stance on cryptocurrency. This move strengthens MARA's balance sheet and positions it as a major player in the crypto mining space. However, investors should note the potential dilution risk if notes are converted to shares. Overall, this deal enhances MARA's liquidity and crypto holdings, which could be positive for long-term growth prospects.

Cryptocurrency Expert

MARA's purchase of 4,144 Bitcoin is a significant move in the crypto market. Acquiring such a large amount at $59,500 per coin shows confidence in Bitcoin's long-term value, despite recent market volatility. This purchase increases MARA's Bitcoin holdings substantially, potentially making it one of the largest publicly-traded Bitcoin holders. The timing is interesting, coming just before Bitcoin's next halving event, which historically has led to price increases. However, the purchase price is relatively high compared to recent market prices, which could impact short-term profitability if Bitcoin's price doesn't appreciate quickly. This move aligns with MARA's strategy of becoming a major player in the Bitcoin mining and holding space, but also increases its exposure to cryptocurrency market risks.

Corporate Finance Specialist

The structure of MARA's convertible note offering is noteworthy. The 2.125% interest rate is competitive, minimizing immediate cash flow pressure. The conversion option starting at a 30% premium provides upside potential for note holders while protecting current shareholders from immediate dilution. The redemption clause after September 2028 gives MARA flexibility to manage its capital structure. Using proceeds for Bitcoin acquisition and potential debt repayment shows a balanced approach to growth and financial health. However, the substantial Bitcoin purchase increases MARA's risk profile. The additional $43.5 million in proceeds provides a liquidity buffer. Overall, this financing strategy supports MARA's aggressive growth in the crypto space while maintaining financial flexibility, but increases its dependency on Bitcoin's performance.

Fort Lauderdale, FL, Aug. 14, 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 the closing of its offering of 2.125% convertible senior notes due 2031 (the “notes”). The aggregate principal amount of the notes sold in the offering was $300 million, which includes $50 million aggregate principal amount of notes issued pursuant to an option to purchase, within a 13-day period beginning on, and including, the date on which the notes were first issued, granted to the initial purchasers under the purchase agreement, which the initial purchasers exercised in full on August 13, 2024 and which additional purchase was completed on August 14, 2024. The notes were sold 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”).

The net proceeds from the sale of the notes were approximately $292.5 million, after deducting the initial purchasers’ discounts and commissions but before estimated offering expenses payable by MARA. On August 14, 2024, MARA also announced that, during the period between August 12, 2024 and August 14, 2024, MARA acquired approximately 4,144 bitcoin for approximately $249 million in cash, using proceeds from the sale of the notes, at an average price of approximately $59,500 per bitcoin, inclusive of fees and expenses. MARA intends to use the remaining 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 are unsecured, senior obligations of MARA and bear interest at a rate of 2.125% per annum, 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 at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, if the last reported sale price of MARA’s common stock has been at least 130% of the conversion price then in effect for a specified period of time ending on, and including, the trading day immediately before the date MARA provides the notice of redemption. 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 notes may require MARA to repurchase for cash all or any portion of their notes on March 1, 2029 or upon the occurrence of certain events that constitute a fundamental change under the indenture governing the notes at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the date of repurchase. In connection with certain corporate events or if MARA calls any note for redemption, it will, under certain circumstances, be required to increase the conversion rate for holders who elect to convert their notes in connection with such corporate event or notice of redemption.

The notes are 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 are 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 conversion rate for the notes is initially 52.9451 shares of MARA’s common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $18.89 per share. The conversion rate is subject to adjustment upon the occurrence of certain events.

The notes were 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. The offering of the notes was 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 MARA’s use of the net proceeds of the offering. 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 the 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 was the size of Marathon Digital Holdings' (MARA) recent convertible notes offering?

Marathon Digital Holdings (MARA) completed a $300 million offering of 2.125% convertible senior notes due 2031.

How many bitcoins did Marathon Digital Holdings (MARA) purchase with the proceeds?

MARA acquired approximately 4,144 bitcoin for $249 million, at an average price of $59,500 per bitcoin, using proceeds from the notes offering.

What is the interest rate and maturity date of MARA's new convertible notes?

The convertible notes have an interest rate of 2.125% per annum and will mature on September 1, 2031.

What is the initial conversion price for Marathon Digital Holdings' (MARA) new convertible notes?

The initial conversion price for MARA's new convertible notes is approximately $18.89 per share.