Coinbase To Raise $1 Billion From Convertible Bond Sale, Adopts Michael Saylor’s MicroStrategy Playbook

US crypto exchange Coinbase plans to raise $1 billion through the sale of convertible bonds, deploying a strategy similar to that Michael Saylor used to fund purchases of Bitcoin by MicroStrategy.

The sale of the convertible bonds, via a private offering, enables Coinbase to avoid an equity sale that would dilute existing shareholders and risk impacting its stock price. Holders will be able to convert them into either Coinbase shares or cash in 2030.

Saylor’s MicroStrategy has also used the debt market to fund its Bitcoin hoard, now worth in the region of $15 billion. It’s raised more than $2 billion from convertible bonds in recent years, the most recent being a $700 million offering of convertible senior notes this month.

Coinbase Announces $1 Billion Convertible Bond Offering pic.twitter.com/8jXxkvAidn

— HZKE (@HZKE_AI) March 12, 2024

Coinbase Takes An Extra Precaution

Coinbase is taking an extra precautionary measure to prevent shareholder dilution during the conversion period, which MicroStrategy did not implement in its recent deal.

To protect its investors, Coinbase will offer “negotiated capped call transactions,“ a hedge to ensure existing shareholders are not diluted.

Coinbase said it will use the funds to repay an existing convertible senior note issue, and for general corporate purposes that might include working capital and capital expenditures, as well as to pay for the capped call transactions.

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