Coinbase $64.5M Debt Buyback: Positive Signal for Investors? 

• Coinbase repurchases $64.5 million of its Convertible Senior Notes due 2026.
• The repurchase is at a 29% discount to par value.
• Coinbase aims to project confidence in its current financial performance.

As crypto companies struggle with a turbulent crypto market, Coinbase reported some positive news. The company is repurchasing its debt at a discount, a strategic decision that could potentially benefit investors.

On Wednesday, June 14, Coinbase entered into separate, privately negotiated purchase agreements to repurchase the $64.5 million aggregate principal amount of its 0.50% Convertible Senior Notes due 2026. Specifically, the company estimates it will spend approximately $45.5 million in cash to consummate the repurchases, representing an approximately 29% discount to par value. 

What This Means for Coinbase

Coinbase hopes this move will strengthen its balance sheet and potentially increase its earnings per share, a key investor metric. The repurchase also indicates that Coinbase has sufficient liquidity to not only service its debt but also repurchase it.

According to Coinbase CFO Alesia Haas, these efforts align with making Coinbase more “efficient and financially disciplined.” 

“We are always looking for the best opportunities to deploy capital to create shareholder value,” said Haas. “This opportunistic repurchase is a continuation of those efforts and reflects our confidence in our business.”

The repurchase will close on or about June 20, 2023, leaving approximately $1.373 billion principal amount of the Notes outstanding. 

Regulatory Issues Hurt Coinbase’s Performance

Recently, Coinbase has faced significant regulatory pressures that have impacted the performance of its stock. 

On June 6, the Securities and Exchange Commission (SEC) charged it for operating an unregistered securities exchange. The same day, Coinbase’s stock dropped to $46.43 per share. It has since recovered to $55.59. 

Like much of the crypto industry, Coinbase has felt the effects of the crypto market crash in November 2022. Since then, the company has been cutting costs, which included significant layoffs. In January 2023, Coinbase cut an additional 20% of its workforce. 

On the Flipside

• There are several reasons why bondholders might agree to sell their debt at a discount. For one, they may need immediate liquidity. 
• Discounted bond sales, in certain cases, also indicate that investors expect the lender to default. 

Why This Matters

Repurchasing debt at a discount is a positive move for stockholders, as it leads to a stronger balance sheet. 

Read more about Coinbase’s plans for its legal battle with the SEC:

Coinbase CEO Willing to Fight SEC in Supreme Court

Binance, Coinbase’s biggest competitor, is also facing legal challenges:

Binance Faces Regulatory Storm as France and Netherlands Pile on the Pressure