Coinbase stock is in the toilet, now it wants to sell $2B in junk bonds

Coinbase is ready to sell $2 billion in junk bonds to the world's top investors just one week after revealing the SEC's impending lawsuit.

Coinbase is looking to sell $2 billion in junk bonds to the world’s top institutional investors.

The top US crypto exchange will sell two bonds — a 10-year with near-5% yield and a seven-year with near-4% — in a bid to raise the funds. 

Wall Street giant Goldman Sachs is leading the deal, relayed the Financial Times citing sources familiar.

Coinbase said the cash would represent low-cost capital to fund product development and acquisitions.

This isn’t the first time Coinbase has sold bonds. It raised $1.25 billion with convertible bonds earlier this year (convertible bonds are a form of corporate debt that transform into standard equity at a set price).

Coinbase also isn’t the only company to do so. 

In fact, US companies (many selling bonds for the first time) are on track to set a 16-year record for junk bonds; over $316 billion worth had reportedly been sold by the end of July, up more than 30% from a year earlier.

Still, Coinbase’s latest debt raise comes as its share price is firmly in the toilet. 

Coinbase junk bonds thicken war chest

Shares in the Delaware-headquartered firm have fallen almost 10% since disclosing the US Securities and Exchange Commission’s intent to sue over its proposed interest-bearing crypto accounts.

Coinbase stock is also down nearly 30% from its direct listing opening price in April, and down 45% since its peak set only hours after.

Coinbase insiders have offloaded close to $5.5 billion worth of company stock overall, and $250 million in the past month.

The Wall Street Journal (WSJ) recently reported that Coinbase had by June’s end amassed a $4.36 billion war chest to help it ride out the impending crypto winter and regulatory crackdowns.

Coinbase’s potential revenue is inherently tied to crypto trading volumes, which can be fickle. So, Coinbase’s junk bonds are poised to help bridge the gap should they drop.

Coinbase stock has struggled to recover from dropping almost immediately on listing.

Read more: [Coinbase insiders dump $250M stock in 1 month as share price recovers]

Recent bull runs boosted Coinbase’s profits to $1.61 billion in this year’s second quarter, up from $32 million in 2020’s equivalent, noted WSJ.

Coinbase chief financial officer Alesia Haas told reporters in August (our emphasis):

“We want to ensure that we maintain those cash reserves so that we can continue to invest and continue to grow our products and services in the event that we go into a crypto winter.”

Update 08:59 UTC, Sept 15: Coinbase raised its debt offering from $1.5 billion to $2 billion overnight, citing demand (via Reuters). Headline and numbers have been updated to reflect this.

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