Publicly traded treasury shares of DeFi Development Corporation ended the trading day down after reports of the company increasing its latest convertible bond offerings to $112 million.
The company first announced a new increase in its convertible bonds of $100 million on Tuesday before raising it to $112 million on Wednesday, with an option for initial bond buyers to add another $25 million in the next seven days.
The majority of the net proceeds from this increase will be used in a pre-funded equity purchase deal of about $75 million, aimed at allowing selected investors in the convertible bonds to hedge their investments.
Parker White, the Chief Operating Officer and Chief Information Officer at DeFi Development Corp., told Dec,rypt: "The pre-funded convertible note is a tool that allows convertible bond investors to short-sell shares artificially without actually short-selling shares in the market." "This also means that if/when the convertible bonds are converted into shares, there won't be a large amount of new shares hitting the market, since these shares were purchased in advance by DFDV."
The remaining net proceeds, which could amount to about $57 million if investors purchased an additional $25 million worth of convertible bonds, will be used for general purposes and additional purchases of Solana.
The company, which started its Solana treasury strategy in early April, has already raised 621,313 Solana or about $95 million through purchases, in addition to acquiring a company to verify Solana. DeFi Development Corp. also raised a $5 billion equity line of credit (ELOC) to help fund "strategic" Solana purchases.
White commented on the decision to use convertible bonds with this increase: "A sound capital structure has multiple types of investors with different risk/return profiles. Convertible bonds allow us to raise capital from convertible bond investors, many of whom do not directly buy shares."
He added: "Convertible bond investors are inherently more conservative in risk-taking and are willing to trade some upside exposure for some downside protection." On the other hand, the equity line of credit allows us to raise capital from equity investors willing to increase upside investment opportunities, who do not mind taking on more downside risk.
According to White, raising capital from both types of investors allows the company to maximize the funds it can raise to purchase SOL, without negatively impacting shareholders.
DFDV shares closed down nearly 3% at $20.39 on Wednesday, still up over 2300% since the beginning of the year. The price had dropped about 10% earlier in the day before rising again.
Solana's stock (c-20) rose by 5% in the past 24 hours, trading above $152, which is about 48% lower than its all-time high in January of $293.31.
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