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Coinbase Junk Bonds Are Plummeting Due To Market Turmoil And Creditors Concerns

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  • Coinbase CEO Brian Armstrong, on the other hand, tried to assuage anxieties by saying on Twitter that we have no chance of bankruptcy, but we introduced a new risk element based on an SEC rule called SAB 121.
  • Both of Coinbase’s junk bond offerings have plummeted around 17 percent and 5.2 percent since its Q1 report on Tuesday, according to bond trading data from Trace Bonds, to sit at $63 and $62.31 at the time of writing. Since the beginning of the month, they have lost 20% and 19%, respectively.
  • Junk bonds carry a higher interest rate than investment-grade corporate bonds due to their lower credit rating. Coinbase raised around $2 billion in September through two evenly spaced offerings of 3.375 percent over seven years and 3.625 percent over ten years, respectively.

Coinbase hasn’t altered in the last week; we’re the same firm we were yesterday and a year ago. Given our balance sheet, we’re actually in a better situation, said Coinbase CEO Brian Armstrong. Coinbase’s junk bonds are plummeting in value, owing to a poor first quarter performance and concerns about what would happen if the company goes bankrupt.

Information About Bankruptcy Proceedings

Both of Coinbase’s junk bond offerings have plummeted around 17 percent and 5.2 percent since its Q1 report on Tuesday, according to bond trading data from Trace Bonds, to sit at $63 and $62.31 at the time of writing. Since the beginning of the month, they have lost 20% and 19%, respectively.

Junk bonds are a type of corporate debt issued by companies with credit ratings below investment-grade. Firms use the junk bond offering to borrow a particular amount of money and then set a maturity date (date of return) and an interest rate to pay on top of the borrowed funds.

Junk bonds carry a higher interest rate than investment-grade corporate bonds due to their lower credit rating. Coinbase raised around $2 billion in September through two evenly spaced offerings of 3.375 percent over seven years and 3.625 percent over ten years, respectively.

Both junk bond offers started out at $100 each and have been steadily declining since then. However, the larger-than-usual loss this month implies that investors are losing faith in Coinbase in the future.

Coinbase stock has also plunged 20% following the release of its Q1 report, despite the fact that market sentiment was already pessimistic, with the price having dropped 50% since the beginning of May. The biggest crypto exchange reported a $430 million loss in the first quarter of 2021, as well as a 27 percent drop in revenue.

Concerns were expressed shortly after the report’s release over a revelation in the Q1 report about what would happen to consumers’ assets if the company was subject to bankruptcy proceedings. Users’ digital assets kept on the platform may be subject to bankruptcy procedures if the company goes bankrupt, according to the notification, and they may be classified as unsecured creditors.

Users were anxious that if Coinbase where to go out of business, they would not be able to recoup their investments. Bond investors, on the other hand, were concerned that customers could still have a claim on Coinbase’s assets since they expect to be ahead of them online.

ALSO READ – Miners not impacted by volatility in Bitcoin market

Stock Price Down With Concomitant Negative Headlines

Coinbase CEO Brian Armstrong, on the other hand, tried to assuage anxieties by saying on Twitter that we have no chance of bankruptcy, but we introduced a new risk element based on an SEC rule called SAB 121. Armstrong also posted a letter about the previous week’s events earlier on Friday. Despite conceding that it can be alarming to see our stock price down with concomitant negative headlines, the CEO called for calm, claiming that the company can weather the present market downturn:

We need to take a step back and zoom out in times like this. Coinbase hasn’t altered in the last week; we’re the same firm we were yesterday and a year ago. Given our balance sheet, we are actually in a stronger situation. We have built an incredible team with some of the best talent in the world, he added. This last bull cycle has generated tremendous profit and cash, which adds to our resiliency..

Nancy J. Allen

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