Coinbase Plans to Raise $1.5 Billion From Debut Bond Sale

Goldman Sachs Group Inc. is managing the sale from its high-yield syndicate desk and may price the deal as soon as Tuesday, according to a person with knowledge of the matter. The bonds will mature in seven and 10 years, and a call with investors is scheduled for 11am Monday in New York, said the person, who asked not to be identified because the details are private. 

The capital raise will bolster the company’s balance sheet with proceeds earmarked for general corporate purposes, which may include continued investments in product development, as well as potential investments in or acquisitions of other companies, products or technology, the company said. 

Coinbase, which went public earlier this year, ended the second quarter with $4.4 billion in cash and cash equivalents, and about $1.5 billion in non-current liabilities. The company is facing increasing competitive pressure from a slew of new and upcoming entrants, such as FTX.US and Bullish, whose backers are flush with cash. Bullish, due to launch later this year, is expected to be bankrolled with $10 billion in funding.

Extra cash could also help Coinbase expand internationally and increase the slate of services it offers. The company got a setback recently after the U.S. Securities and Exchange Commission said it would sue if Coinbase launches its new interest-bearing account called Lend. Coinbase is also growing through acquisitions. Just this year, it bought analytics provider Skew and crypto cloud service Bison Trails.

Cryptocurrency markets are highly volatile, adding a layer of risk for investors in the industry. The world’s biggest cryptocurrency, Bitcoin, is up more than 50% since the beginning of the year — ranging between about $28,000 and $65,000. Smaller cryptocurrencies tend to swing even more. Coinbase’s shares are down less than 1% since their April debut, though they had shot higher right after their direct listing, before falling precipitously over the next month.

Companies are storming the bond market, taking advantage of an attractive funding environment. Borrowing costs are expected to rise when the Federal Reserve begins tapering its support for financial markets. MicroStrategy Inc. sold the first ever junk bond to fund Bitcoin purchases in June. Its $500 million of bonds due in 2028 have risen since then to over 102 cents on the dollar, according to Trace pricing data.