• Coinbase plans to raise $2B in debt shortly after a weak earnings report.
• The offering includes protections to limit share dilution from conversions.
• Funds will support hedging costs, operations, and possible debt repurchases.

Coinbase is moving forward with a major fundraising plan just days after posting disappointing earnings. The company wants to raise $2 billion by offering convertible senior notes to big institutional investors. These notes are split into two sets: $1 billion due in 2029 and another $1 billion due in 2032.

The notes are unsecured and will earn interest every six months. They can be converted into cash, Coinbase shares, or a mix of both. Buyers of these notes will also have the option to purchase up to $150 million more of each series within 13 days of the deal’s launch.

The final interest rate, conversion terms, and other details will be decided when the notes are priced. Despite the recent dip in performance, the company is betting that institutional demand for its debt remains strong. These offerings won’t be available to the general public and fall under a specific rule that limits sales to qualified investors.

Also Read: Coinbase Ignites Futures Market With nano XRP and SOL Launch On August 18

Stock Dilution Risk Gets a Buffer

To limit the impact of converting debt into stock, the company is putting a hedge in place. This involves what’s known as capped call transactions, agreements that protect the company from having to issue too many new shares if the notes are converted into stock later.

These capped calls will match the number of shares tied to each series of notes, adjusting for changes as needed. They help reduce both dilution and any extra cash the company might need to pay during conversions. The banks involved in these capped calls, or their partners, are likely to buy Coinbase shares or enter into related stock trades around the time the notes are priced.

This trading activity might push up or soften changes in the company’s stock price. These partners might also continue trading in Coinbase stock through various future dates tied to conversions or note buybacks. This setup is designed to shield Coinbase from market swings tied to the debt and give it flexibility in how it handles conversions down the line.

Coinbase Plans to Use New Funds for Capped Call Costs

Coinbase says part of the money raised will go toward paying for the capped call agreements. If the note buyers go for the extra $150 million options, more funds will be used to cover those added costs.

The rest of the proceeds will go into everyday business expenses, like working capital, possible acquisitions, and technology investments. Coinbase might also use the funds to pay down older debt, including notes maturing in 2026, 2028, 2030, and 2031, or to buy back some of its stock, depending on market conditions. This new round of funding is a key step in Coinbase’s broader strategy to stay flexible and funded, even in a shaky market.

Also Read: Coinbase Joins Top 10 Bitcoin Treasuries Amid Strong Q2 Results