U.S. crypto exchange Coinbase wants to use a planned $1.5 billion private placement of senior notes for general corporate purposes. This includes potential mergers and acquisitions, as well as other investments.
The announced notes, maturing in 2028 and 2031, will be fully and unconditionally guaranteed by Coinbase Inc. The interest rate, repayment terms and other conditions will be determined only through negotiations between Coinbase and the initial purchasers.
Capital raise through senior notes
According to Coinbase, this capital increase represents an opportunity to strengthen its already strong balance sheet with low-cost capital. Coinbase intends to use the net proceeds from the offering for general corporate purposes and product development. This includes potential investments in or acquisitions of other companies, products or technologies that Coinbase may find useful in the future. An investment in cryptocurrencies like the one Michael Saylor undertook for MicroStrategy is also on the table.
The closing of the offering is subject to regulatory, market and other conditions. The notes and the related guarantee are being offered and sold through a private offering memorandum only to persons who are deemed to be qualified institutional buyers. Neither the notes nor the related guarantee will be registered under the Securities Act or the securities laws of any jurisdiction other than the United States.
Coinbase already under regulatory pressure
Despite Coinbase's efforts to comply with existing securities laws, the exchange recently faced scrutiny by the SEC. The Securities and Exchange Commission warned Coinbase against launching a product that would allow consumers to earn interest on their crypto holdings. In their opinion, this should be classified as an unregistered security.
The "Lend" project would offer Coinbase customers the opportunity to earn interesting returns on their crypto holdings. Ahead of the launch of this project, the exchange said it remained proactive in compliance. However, a Wells notice warned that the SEC would pursue an enforcement action if the company launches its product.
Exactly what the future of cryptocurrencies will look like in the U.S. remains to be seen. Big names in government have repeatedly stressed the importance of investor protection, including Gary Gensler, chairman of the SEC. Some frustrated lawmakers are expected to question the chairman of the Securities and Exchange Commission about the agency's plans to regulate cryptocurrency markets.