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Cryptocurrency exchange Coinbase has made the move to buy back its 2031 senior notes, as part of a plan to get then discounted rate of 35.5% – specifically, 64.5 cents on the dollar. The decision was announced on August 7th.
Coinbase aims to extend until September 1st and is offering additional incentive as an early premium of three cents per dollar on top of the standard purchase price. These 2031 senior notes collectively have a principal balance totalling around $1 billion.
This buyback plan follows Coinbase’s recent conversion of $65 million worth of convertible notes, which were acquired at a discount of 29%. During the downturn and volatility that the cryptocurrency market has been facing, the value of Coinbase’s debt securities has been consistently undertrading.
It’s worth noting that the catalyst for this move was revealed in Coinbase’s May 2022 filing with the US Securities and Exchange Commission (SEC). This filing indicated that digital assets owned by users on Coinbase’s platform could possibly be subject to bankruptcy proceedings. This would mean users would risk becoming wrapped up in legal battles as they could be categorised as unsecured creditors. This disclosure of potential risk is a standard practice in SEC filings for publicly listed companies.
Not your keys, not your crypto. This is from coinbase. pic.twitter.com/CaIzQBYQ38
— Richard Heart (@RichardHeartWin) May 11, 2022
Coinbase also finds itself in the middle of the ongoing legal battle with the SEC. The exchange is currently facing allegations of operating an unregistered securities exchange. In response, Coinbase is hoping to have the lawsuit dismissed.
In its recently published Q2 2023 report, Coinbase offered further insights into its financial landscape. The company revealed that it currently holds $3.3 billion in long-term debt, which stands alongside $5.2 billion in cash and equivalents. Coinbase reported an operating cash flow of $614 million over the initial six months of 2023. In comparison to the second quarter of the previous year, customer crypto deposits on the Coinbase platform experienced substantial growth, surging by an 40% to reach a total of $124.2 billion.