Coinbase to partially buy back $1 billion bonds at a premium

Coinbase has offered to buy back part of its $1 billion bonds from investors at a premium following a strong financial performance in the second quarter. The crypto exchange operator will buy back up to $150 million of its $1 billion bonds maturing in 2031, the company said Monday.

Investors who participate in the buyback offer and sell their bonds before Aug. 18 will receive $645 for every $1,000 of the bond’s face value (i.e., 64.5 cents on the dollar). This amount includes a special early-tender premium of $30. For those who sell their bonds after Aug. 18 but before Sept. 1 — the offer expiration date — Coinbase will offer $615 for every $1,000 of the bond’s face value (i.e., 61.5 cents on the dollar).

The overall buyback offer is at a premium since the two offer prices are higher than the unaffected price of the bond, pre-announcement, as of Aug. 4 — which is around 60 cents on the dollar, according to Business Insider data.

The slight premium comes as Coinbase beat analyst estimates for the second quarter, reporting revenues of $708 million and adjusted earnings-per-share loss of $0.42, ahead of analyst estimates of revenues of $628 million and earnings-per-share loss of $0.76. The bitcoin price is also near 2023 highs, which could contribute to the buyback offer.

Coinbase has engaged Citigroup Global Markets to manage the buyback offer. The bonds in the offer, maturing in 2031, are just one of three outstanding debts of the company. Coinbase also has two other bonds maturing in 2026 and 2028, respectively, with a total value of over $1 billion.

What are buybacks?

Companies announce buybacks to repurchase their own shares or bonds from the market or existing investors.

Bond buybacks can benefit both companies and investors. For companies, buying back bonds allows them to reduce their debt load, lower interest expenses and improve their overall financial position. For investors, selling their bonds back to companies can provide them with early liquidity and the ability to participate in other high-yielding investment opportunities, among other benefits.