Coinbase has issued convertible bonds again, what should retail investors do? Last night, Coinbase continued to plummet! Don't turn back when it's rising, and don't turn back when it's falling! It's too wild! It's too wild! one ️⃣ What happened? Coinbase wants to borrow $2 billion from institutional convertible bonds - with lower interest rates and temporarily no stock issuance. Use another 'covered call' to control the potential dilution of equity caused by bond to stock swaps within approximately 0.8-1.8%. The specific operation is to issue two convertible bonds: -1 billion US dollars, due in 2029 -1 billion US dollars, due in 2032 In addition, underwriters can also purchase up to $300 million worth of similar notes. It's really good that it's only sold to 'big spenders' (qualified institutional investors) and not available to individual investors. Details such as interest rates and conversion prices have not been announced yet. As soon as the news came out, the stock price plummeted by 5%! Why did Coinbase choose this method? -Low financing cost The interest rate of convertible bonds is usually lower than that of ordinary corporate bonds, because it gives the sweetness of "conversion". (Convertible Bond Science: Convertible bond holders have the right to exchange their bonds for stocks at a predetermined price in the future. If the bonds are exchanged, it will increase the number of outstanding shares and dilute earnings per share.) -Not immediately diluted Funds have been received, but there is no need to issue new shares in the short term. How can "Capped Call" insurance save equity dilution? This is an upper limit call option. Coinbase pays to purchase this' insurance '. In the future, if convertible bond holders really come to exchange stocks, the company can offset the dilution with stocks obtained from insurance until the set "upper limit" is reached. Only when the upper limit is exceeded will it truly dilute. Dilute the theory from ≈ 2.5% to approximately 1-2%. The calculation method is as follows 👇 -Issuance scale of 2 billion US dollars ÷ market value of 80 billion US dollars ≈ 2.5%. -Previous similar cases (Meta, Shopify, Block, etc.) have shown that capped calls can typically offset 30-70% of potential dilution, -2.5% x (1-30%~70%) ≈ 0.8% -1.8%, rounded to "about 1-2%" Let me give you an analogy: Convertible bond="I borrowed money from a friend, promised interest, and in the future you can buy my shares at a discounted price Capped Call="I also bought insurance: When my friend really comes to buy stocks, I can get stocks from the insurance company to make up for the shortfall and pay less for my own stocks. ” Is raising money necessarily a bad thing? Not necessarily! From the perspective of the next 1-3 months, now may be a good time for layout. The last time Coinbase issued convertible bonds was in September 2021, and the market continued to rise until November. In fact, the management knows how to raise more funds when the market is good for money, and plan for the future. But if you can't sell at the peak, then it might be said that people are stupid and have more money, and it's difficult to sell in public. Now the financing cost is low, and there is little pressure on profitability. Supplementing funds and ammunition can accelerate the layout of custody, on chain RWA, international expansion, mergers and acquisitions, and technology investment to enhance the moat. Only when the stock price rises above the "upper limit price" will it begin to dilute; If the time comes to be really good, all shareholders have already won win thoroughly. The operation of a company cannot be smooth sailing, and secondary investment cannot only rise and not fall. Let's be friends of time together, let's set our sights on the long term. Project Crypto allows a single application to provide customers with comprehensive financial services. Coinase is one of the most likely to become the world's largest financial services companies. The Chief Investment Officer of Bitwise even believes that Coinbase will be the next trillion dollar enterprise. The market is sometimes irrational. Few