Coinbase’s junk bond offerings have dropped roughly 17% and 5.2% since its Q1 report on May 10. Bond holders are worried that users might get some of their funds back in the event of bankruptcy.
Junk bonds are a form of corporate debt issued by firms that do not have investment-grade credit ratings. Firms borrow a certain amount of money via the junk bond offering, and set a maturity date and an interest rate that they will pay on top of the borrowed capital.
As junk bonds have a lower credit rating, they command higher interest rates than investment-grade corporate bonds. In Coinbase’s case, itin September across two evenly spread offerings at 3.375% over seven years and 3.625% over 10 years. Notably, both junk bond offerings launched at $100 each, and have been steadily trending downwards ever since. The sharper than usual drop this month however suggests that investors are losing confidence in Coinbase moving forward.
The price of Coinbase stock has also dropped 20% since the date of its Q1 report, although investor sentiment was already bearish beforehand, with the price dropping a hefty 50% since the start of May.alongside a 27% decrease in revenue compared to the first quarter of 2021. Shortly after the report had been released, concerns were raised over a disclosure in the Q1 report regarding theThe disclosure noted if the company were to go bankrupt, user’s digital assets held on the platform may “be subject to bankruptcy proceedings” and could see them treated as “unsecured creditors.”
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