Facing off with the SEC, Coinbase Announces $1.5 bn Bond Sale
Earlier this week, the leading US-based cryptocurrency exchange Coinbase Global Inc. announced that it will be bolstering its already strong balance sheet with a hefty $1.5 billion junk bond sale. This announcement generated so much institutional and investor interest that the company subsequently increased the sale to $2 billion. The bond offering has fueled the raging fire of crypto going mainstream, as it gives cryptocurrencies their biggest endorsement as of yet.
According to The Economic Times, an impressive $7 billion worth of orders were placed for equal quantities of seven and ten-year bonds, each of which boasted interest rates of 3.375% and 3.625%, respectively. A massive endorsement of this offering from debt investors, associated bonds earned a BB+ rating from S&P Global Ratings, one notch below investment grade. The proceeds of this bond sale are intended to go to what is being described as “general corporate purposes” including “continued investments in or acquisitions of other companies, products, or technologies that Coinbase may identify in the future,”.
This announcement came shortly after the Securities and Exchange Commission (SEC) threatened to sue the firm over its upcoming lending program. During the first week of September, Coinbase received a warning from the SEC (known as a Wells notice) against their Lend product which would allow investors to earn interest on their cryptocurrency holdings. In response to this warning, Coinbase published a blog defending the product saying, “as surprised as we were at the SEC’s threat to sue without ever telling us why we want to be transparent with you about the course of events leading up to it”. The blog further states Coinbase’s Lend program does not qualify as a security, and that the exchange has been cooperative with all of the SEC’s inquiries to date. T
Should Coinbase’s bond offering continue to go off without a hitch, and the Lend product meet its’ October release date, other exchanges like Binance or Gemini may be prompted to begin selling debt. Earlier this year, Coinbase went public with a Nasdaq listing that sent shockwaves through the crypto world, sending its market value past $100 billion at the time and making it one of the top 100 publicly traded U.S companies
This offering joins others in solidifying cryptocurrencies’ position as a valuable asset and investment opportunity that has made its way from the counterculture to the mainstream.