Coinbase (NASDAQ:COIN) just pulled off a $2.6 billion convertible note offering that’s as bold as it is strategic. The deal includes two tranches of zero-coupon senior notes$1.3 billion due 2029 and $1.3 billion due 2032targeted at institutional buyers. Both sets are convertible into equity at steep premiums: $454.44 for the 2029s (a 52.5% markup) and $394.84 for the 2032s (a 32.5% jump). And if demand holds, that number could climb to $2.96 billion with additional allotments. Notably, these are unsecured, interest-free, and offer Coinbase the flexibility to settle in cash, shares, or bothdepending on market conditions and timing.
But that’s just the setup. Coinbase is also hedging dilution risk with capped call transactions that raise the effective upper limit to $595.98 per shareexactly double the current stock price. That means even if shares spike post-conversion, equity dilution stays contained. About $194.4 million of the proceeds will go toward funding those capped calls. The rest? Management’s leaving the door wide openthink acquisitions, capex, working capital, or even buybacks and debt repayments across its existing 20262031 maturities. It’s a capital-raise with multiple strategic levers baked in.
There’s more: starting in late 2029, Coinbase can redeem the 2032 notes earlyif its stock holds 30% above the conversion price over a sustained period. Meanwhile, option counterparties involved in hedging the capped calls are likely to be active in the stock, which could push shares higher (or at least cushion any downside) in the short run. For investors, this raise isn’t just about raising capitalit could be a signal that Coinbase is prepping for something bigger.
This article first appeared on GuruFocus.
