Coinbase, the leading U.S.-based cryptocurrency exchange, has intensified enormous demand for its junk bond offering lately, with the firm successfully increasing the size of the sale by roughly 33% from $1.5 billion to $2 billion.
According to an Economic Times report published on September 14, at least $7 billion worth of orders were placed in competition for equal quantities of seven and 10-year bonds, offering interests of 3.375% and 3.625%, respectively.
Nonetheless, an anonymous source quoted in the publication claimed that the said interests were relatively cheaper compared to initial quotes offered by Coinbase. In that context, the influx of demand suggests that buyers held a higher opinion of the company’s creditworthiness than initially expected by the exchange.
While commenting about the adoption of junk bonds at Coinbase, Julie Chariell, a renowned analyst at Bloomberg Intelligence, stated:
“The strong demand is a big endorsement by debt investors.”
“Coinbase is a strong company and a leader in crypto trading, but it’s looking to do more to diversify away from that, which can be a volatile business.”
Coinbase junk bonds currently rate one rank below investment-grade, with Bloomberg bond indexes indicating that similar debt offering attracts roughly 2.86% yield on average.
By description, junk bonds are corporate debts issued by a company that does not have an investment-grade credit rating. Due to their reduced credit rating, junk bonds attract higher interest rates than investment-grade corporate bonds.
Coinbase released its debt offering report on September 13, revealing that the funds would be utilized for “continued investments in product development” and “potential investment in the acquisition of other companies, products, and technologies” the crypto exchange may advance in the future.
Interestingly, Coinbase is only the second major crypto company that has completed a junk bond offering, with MicroStrategy Inc issuing $500 million worth of fiat to fund Bitcoin accumulation following the market crash in June.
Since trading as high as $342 on its opening day, Coinbase’s COIN stock last traded for $243. Nevertheless, COIN has roughly soared 20% since late June.
Coinbase’s recent bullish sentiments appear barely a few days after the U.S Securities and Exchange Commission (SEC) threatened to take legal action against the exchange if it proceeds to launch a USDC lending feature.
Before the SEC’s warning, Coinbase had wanted to launch its crypto lending product ‘Lend’ in only “a few weeks.”