The latest announcement on August 7 reveals that the cryptocurrency exchange Coinbase is set to initiate a buyback of up to $150 million of its outstanding high-yield bonds due in 2031. This buyback will be at a price of 64.5 cents per USD, representing a 35.5% reduction. The buyback offer will extend until September 1, with an initial fee of 3 cents per USD compared to the regular purchase price.
These high-yield bonds, maturing in 2031, carry an annual interest rate of 3.625% and have a total principal amount of $1 billion. In July 2023, Coinbase also executed a buyback of $65 million worth of convertible bonds at a 29% discount. Notably, since the onset of the cryptocurrency bear market, Coinbase’s debt securities have consistently traded at a discount to face value. This trend reflects investor concerns regarding its repayment capability.
In its filing with the U.S. Securities and Exchange Commission (SEC) in May 2022, Coinbase highlighted that users’ digital assets held on its platform could undergo bankruptcy proceedings and be considered “unsecured creditors.” Such risk factors are disclosed as part of SEC filings for publicly listed companies. Similar situations have been seen in other legal proceedings, such as FTX and Celsius, where unsecured creditors typically recover only a portion of their initial assets when the company’s funds are liquidated to repay higher-ranking creditors.
Coinbase is also contending with an ongoing lawsuit by the SEC, alleging that they were operating an unregistered securities exchange. Subsequently, the company has filed a motion to dismiss the lawsuit. In their Q2 2023 report, Coinbase revealed that they hold $3.3 billion in long-term debt compared to $5.2 billion in cash and equivalents. The exchange recorded a cash flow of $614 million in the first six months of 2023. Customer deposits in cryptocurrencies on the platform have increased by 40% to $124.2 billion compared to Q2 2022.