Crypto exchange Coinbase (COIN) announced on Tuesday that it plans to raise $2 billion through a convertible debt offering. This move comes as more crypto companies rush to secure funding while investor interest is strong and the Trump administration pushes pro-crypto policies. At the same time, Congress is working on new regulations that add legitimacy to the asset class, which is a big change from the cautious approach taken during the Biden years. According to Bloomberg, Coinbase’s convertible debt will be split into two parts.
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The first is a 0% coupon bond due in 2029 with a conversion premium of 50% to 55%, while the second is due in 2032 with a conversion premium of 30% to 35%. However, Coinbase shares are down over 4% at the time of writing, which suggests that some investors are taking a more cautious approach even as enthusiasm for crypto-related fundraising grows. Interestingly, Coinbase plans to reduce the impact of potential stock dilution from these bonds being converted by entering into capped call transactions with financial institutions, thereby limiting the number of new shares that would need to be issued.
Essentially, these counterparties are expected to hedge their positions by buying or trading Coinbase’s Class A shares or related derivatives, which could influence the stock price during and after the notes are priced. The company explained that these trades may affect the value of both the notes and the shares that investors receive when converted, depending on when the transactions occur.
Is COIN a Good Buy Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on COIN stock based on 14 Buys, 12 Holds, and two Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average COIN price target of $376.67 per share implies 24.1% upside potential.
