Coinbase plans to sell $1.5 billion of corporate debt

Coinbase Global Inc (COIN.O) said it intends to raise an extra $1.5 billion through a private debt offering. The cryptocurrency platform, which is listed on the Nasdaq exchange, will sell so-called senior notes, which will mature between 2028 and 2031.

Coinbase said that despite its positive cash flow, the debt deal would provide it with cheap financing and bolster their “already-strong balance sheet” with low-cost capital. Apparently, the bond offering was a strategic move to raise extra liquidity at a time when interest rates remain at historic lows.

The release states that Coinbase would use the proceeds for “general corporate purposes,” which may include investments in product development, acquisitions of other companies, or technologies that Coinbase may identify in the future. However, Coinbase did not provide more specifics or if it intends to use any of the money it raises to add crypto holdings to its balance sheet.

The move comes barely one month after the U.S. Securities and Exchange Commission warned Coinbase of a possible enforcement action if it goes ahead with plans to launch an interest-earning product. The popular exchange, which went public by means of a direct listing five months ago, had planned to launch the DeFi instrument in the coming weeks.

Coinbase’s shares have hit fresh lows after the SEC said it intends to sue cryptocurrency exchange and services firm over the product. The company’s chief executive officer, Brian Armstrong, indicated that Coinbase was caught off guard by the SEC’s threat considering its efforts to engage with regulators since its IPO.

The product’s launch, which would allow Coinbase users to earn a 4% annual percentage yield on its USDC stablecoin, has been delayed until at least October.

On Monday, Coinbase stock was trading at $242 at market close—down nearly 26% from the $342 high it hit shortly after shares debuted its public trading in April.

Earlier in March, Coinbase was ordered to pay $6.5 million in restitution to resolve civil charges brought by the CFTC for inaccurate reporting as well as wash trading on its institutional platform.

Following investigations, the CFTC said Coinbase delivered false reports concerning cryptocurrency traded on its GDAX platform, which was then rebranded as Coinbase Pro. The regulator added that a series of unauthorized and fictitious transactions were made on the GDAX platform between January 2015 and September 2018 and possibly more.

Coinbase’s motive for executing the wash trades was to give the impression of deeper liquidity, which gives investors a better chance to move in and out of positions quickly. In addition, the wash trades artificially inflated Coinbase trading volumes reported to the market as the more liquidity an exchange appears to have, the more appealing it becomes to investors.