Bitcoin miner MARA Holdings Inc (NASDAQ:MARA) recently completed its $850 million offering of 0% convertible senior notes due 2031. This happened soon after it completed a $1 billion offering of 0% convertible senior notes due 2030 in November.
What Happened: The sale of the notes was completed in two days as the initial purchasers flocked and exercised the purchase of the initial and the additional principal by Dec. 4, after the offering was announced on Monday, Dec. 2.
The notes were offered to qualified institutional buyers with 0% interest and no accretion of principal because of its conversion rate of 28.9159 shares of MARA's common stock per $1,000 principal amount of notes, equaling an initial conversion price of approximately $34.5830 apiece.
MARA's conversion price represents a premium of approximately 40% over the Dec. 2 mid-day share price of $24.70 apiece.
Additionally, the conversion price of $1 billion notes that were offered to the investors in November represented a premium of approximately 42.5% over the Nov. 18 mid-day share price of $18.1848.
A convertible note is a hybrid instrument that can be exchanged for equity in the company at a later date. These convertible notes, even though with 0% interest, still favor investors in the event of bankruptcy as bondholders are given repayment priority ahead of shareholders.
At the same time, the conversion feature of these notes eventually helps the debt holders to participate in the equity upside on conversion.
Why Does MARA Need To Raise Money?
MARA announced that it will use $48 million of the net proceeds from the sale of the notes to repurchase approximately $51 million in aggregate principal amount of its existing convertible notes due 2026. Whereas, the remaining proceeds will be used to acquire additional Bitcoin (CRYPTO: BTC) and for general corporate purposes.
MARA's Current Bitcoin Holdings
According to Benzinga Pro, as of Dec. 9, the company held 26,842 Bitcoins valued at $2.64 billion, representing an average price of $98,363. The company holds about 0.128% of the total Bitcoin supply, as compared to 1.2% held by MicroStrategy Inc (NASDAQ:MSTR).
Terms Of Redemption And Conversion
The notes will mature on June 1, 2031, unless earlier repurchased, redeemed or converted. Furthermore, prior to March 1, 2031, the notes are convertible only upon the occurrence of certain events. Apart from the conversion feature, these notes are also callable.
The call dates for MARA to redeem 100% of the principal amounts are June 4, 2027, and June 4, 2029. The company can also call back the bonds on any date if the last reported sale price of MARA’s common stock has been at least 130% of the conversion price.
Price Action
Shares of MARA were down 2.91% at $25.66 per share in premarket on Monday. Nasdaq 100 futures were 0.19% lower at 21,614.25 points.
On a year-to-date basis, the Nasdaq 100 Index is up 30.70% in 2024, while MARA underperformed the gauge with 15.26% growth in the same period. Apart from this, MARA was up 35.82% and 5.68% in the last six months and one month, respectively.
According to Benzinga, MARA has a consensus price target of $23.83 per share based on the ratings of 17 analysts. The highest price target out of all the analysts tracked by Benzinga is $66 apiece issued by Compass Point as of March 8, 2022. The lowest target price is $4 per share issued by Jefferies on Jan. 9, 2023.
The average price target of $26.67 apiece between HC Wainwright & Co., Barclays, and Compass Point implies a 3.80% upside for MARA.
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