Coinbase Boosts Shareholder Value Through $65M Convertible Notes Amid SEC Pressure

Key Points:

• The redemption of $64.5 million of 0.50% Convertible Senior Notes due 2026 has been agreed upon by Coinbase.
• Due to the notes’ 29% discount to par value, the company anticipates it will only require $45.5 million in cash to complete the deal.

Coinbase has just agreed to repurchase a large chunk of its 0.50% Convertible Senior Notes due 2026.

Due to the notes’ 29% discount to par value, the company anticipates it will only require $45.5 million in cash to complete the deal.

The purchase agreements, which were privately negotiated with select note holders, are part of Coinbase’s continuous efforts to strategically deploy cash and generate value for its shareholders.

In a statement, Alesia Haas, Chief Financial Officer, stressed the significance of these repurchases:

“We are always looking for the best opportunities to deploy capital to create shareholder value. This opportunistic repurchase reflects our confidence in our business, strong financial performance in the first quarter, and improved competitive positioning.”

Investors’ concerns were heightened by a May 2022 admission that if the company goes bankrupt, customers’ digital assets housed on the platform may be subject to bankruptcy procedures and may be considered unsecured creditors.

Coinbase Global Inc. DL-Notes 2021(21/31) issued in September 2021, for example, are now trading at 54 cents on the dollar. This loan, worth over $1 billion, was issued with a coupon rate of 3.625% and a maturity date of October 2023. The current yield on the bond is 15.2%.

In conjunction with the original issue of the notes, Coinbase had previously engaged in capped call transactions with select financial institutions. Notwithstanding the repurchases, these deals will remain in effect.

Coinbase has been working hard to become a more efficient and financially conservative corporation, as stated in its most recent shareholder letter. The first quarter of 2023 was a watershed moment for the firm, and these repurchases are consistent with the company’s goal of lowering outstanding debt and improving its capital structure.

Subject to normal closing conditions, the buyback transaction is scheduled to conclude on or around June 20, 2023. When these repurchases are completed, roughly $1.373 billion in the principal amount of the Convertible Senior Notes will remain outstanding.

Notwithstanding the current Securities and Exchange Commission securities investigation against Coinbase, it ensures that it will continue to manage the fast-expanding crypto company, remaining focused on capital deployment methods that produce long-term shareholder value. The SEC accused Coinbase of running an unregistered securities exchange and selling unregistered securities via its staking-as-a-service platform.

DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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Harold

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