MARA Holdings Inc (NASDAQ:MARA) has announced another private offering of $700 million of zero-coupon convertible senior notes due 2031 after completing a $1 billion offering of 0% convertible senior notes due 2030 in November.
What Happened: The notes will be offered to qualified institutional buyers with 0% interest and no accretion of principal, as per the company’s press release. The interest rate, initial conversion rate, and other terms of the notes will be determined at the time of pricing of the offering.
The current offering will also be primarily to acquire bitcoin and repurchase existing convertible notes due 2026.
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.
From the previous offering after deducting the initial purchasers' discounts and commissions MARA raised approximately $980 million. Of that, it used $199 million to repurchase $212 million in aggregate principal amount of its existing convertible notes due 2026. The remainder of the net proceeds were used to acquire additional Bitcoin (CRYPTO: BTC) and for general corporate purposes.
Why It Matters: 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.
MicroStrategy Inc (NASDAQ:MSTR) has also been issuing 0% convertible notes to acquire cryptocurrency lately. Michael Saylor shared MARA’s update and said it is a “company on the Bitcoin Standard.”
MARA’s Current Bitcoin Holdings
According to Benzinga Pro, as of Dec. 2, the company held 26,842 Bitcoins valued at $2.54 billion, representing an average price of $94,96.
Price Action: Shares of MARA were down 1.97% at $26.88 per share in premarket on Monday. Nasdaq 100 futures were 0.04% up at 21,005.25 points.
On a year-to-date basis, the Nasdaq 100 Index is up 26.51% in 2024, while MARA underperformed the gauge with 19.58% growth in the same period. Apart from this, MARA was up 40.04% and 76.90% 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 $27 apiece between Barclays, Compass Point, and Macquarie implies a 0.18% downside for MARA.
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