Already one of the worlds biggest crypto exchanges, with over 50 million registered users, today Coinbase announces bond sales via a private senior note offering, its first ever private debt offering, with a target of $1.5B US.
A private senior notes offering refers to the sale of senior notes by a company seeking to raise money from investors. Typically, the announcement of a private senior notes offering is accompanied by a legal disclosure of the amount the company is seeking to raise, and what the company plans to do with the money, and in this case Coinbase has disclosed the funds raised from the offering would be used for general corporate purposes, including product development and potential mergers and acquisitions in the future.
Coinbase announces bond sale less than 6 months after IPO
The Private Senior Note offering (PSN) are contracts which will be due for 2028 and 2031, and the company says it will fully and unconditionally back them, with interest rate, redemption process and the general terms of the contract being determined through negotiations with early buyers. In it’s official blog, Coinbase said that whilst the offering was subject to market conditions, the proceeds from the raise would be used for continued investments in the company, including ‘potential investments in or acquisitions of other companies, products, or technologies that Coinbase may identify in the future.‘
“This capital raise represents an opportunity to bolster our already strong balance sheet with low-cost capital. Coinbase intends to use the net proceeds from the offering for general corporate purposes, which may include continued investments in product development, as well as potential investments in or acquisitions of other companies, products, or technologies that Coinbase may identify in the future. The closing of the offering is subject to market and other conditions.”Coinbase official Blog on the announcement of the PSN’s
Coinbase went public in April 2021 with one of the highest valuations ever at the time of its debut, and has consistently said it is increasing it’s range of products and services. Coinbase ended Q2 with over $4.4B in cash, and around $1.5 in non-current liabilities, but is facing increasing pressure from competitors, including new market entrants such as FTX and Bullish, which have strong capital backing. The company was earlier this year authorized by regulators in Japan to offer services, and also obtained BAFIN approval to custodial services in Germany.
The company is currently undergoing investigation by the SEC into it’s LEND protocol, with the regulator issuing Coinbase with a Wells notice, which is an official notice that it intends to sue it in court, but the company has hit back saying on it’s blog that it has no idea why as they don’t believe that LEND qualifies as a security. This is because customers aren’t investing directly in the program, rather they are lending (staking) their USDC which they hold on the company’s platform in connection with their ‘existing relationship’ to Coinbase, and there is an obligation on the company to pay interest to investors.
CEO Brian Armstrong slammed the SEC last week for it’s lack of clarity and threats, and said the company would continue to offer the best crypto services to it’s users.
The SEC has repeatedly asked our industry to “talk to us, come in.” We did that here. But today all we know is that we can either keep Lend off the market indefinitely without knowing why or we can be sued. A healthy regulatory relationship should never leave the industry in that kind of bind without explanation. Dialogue is at the heart of good regulation.Paul Grewal, Chief Legal Officer, Coinbase