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According to a June 15 announcement, cryptocurrency exchange Coinbase has entered into an agreement to redeem $64.5 million in 0.50% convertible senior notes maturing in 2026. 29% discount to the face value of the bonds. Coinbase writes:
“The Buyback is expected to close on or about June 20, 2023, subject to normal closing conditions. Following such closures, the principal amount of the Notes, in the amount of approximately $1.373 billion, will remain outstanding.”
Alesya Haas, CFO of Coinbase, called the transaction an “opportunistic buyout” and said the firm will continue to seek such opportunities in the future. Many Coinbase debt instruments have been trading at a discount since the start of the cryptocurrency bear market.
Investor fears were exacerbated by the disclosure in May 2022 that if the company went bankrupt, users’ digital assets held on the platform could be “subject to bankruptcy proceedings” and could be treated as “unsecured creditors.”
In one case, Coinbase Global Inc. DL-Notes 2021 (21/31), released September 2021, are currently trading at 54 cents on the dollar. This debt was issued in excess of US$1 billion with a coupon rate of 3.625% maturing in October 2023. The current bond yield is 15.2%.
However, the discounts do not appear to have attracted investors. On June 6, the U.S. Securities and Exchange Commission accused Coinbase of running an unregistered securities exchange and selling unregistered securities as part of its staking-as-a-service program. The litigation is ongoing.