MARA Holdings recorded a stock drop of 4.5% on June 6, 2024, after announcing a massive convertible bond offering for 850 million dollars, leaving the markets in shock over the scale of the operation and the future of the company’s shares.
What does the offering of convertible bonds by MARA mean?
The announcement concerns a proposal for the issuance of senior convertible bonds with zero coupon, intended exclusively for qualified institutional investors according to Rule 144A of the U.S. Securities Act.
The maturity is set for August 1, 2032, but the bonds may be redeemed, repurchased, or converted before that date.
MARA also offers buyers the opportunity to purchase up to 150 million dollars additional in bonds, within 13 days from the issuance date.
These are unsecured and without regular interest: the principal amount, in fact, will not grow over time. The convertible feature allows the bonds to be converted into cash, MARA common stock, or a combination, according to the company’s choice.
The immediate effect was a loss of value on the stock exchange of 4.5%. The main reason was the risk of share dilution.
When a company issues new convertible bonds, there is a real possibility that, at the time of conversion, new shares will be introduced to the market, thereby reducing the percentage value for existing shareholders.
MARA, aware of the criticality, has simultaneously announced the initiation of capped call transactions. These privately conducted operations are intended to limit the dilutive impact on common shares in the event the conversion is exercised.
The capped calls usually involve the purchase of derivatives: consequently, the counterparties might purchase MARA shares on the market or enter into contracts that influence the stock price.
The use of funds has been divided into three main directions:
Up to 50 million dollars: allocated for the repurchase of part of the existing senior convertible bonds, with a 1.00% coupon and maturing in 2026.
A significant portion for capped call operations described above, in order to protect shareholders from dilution risk.
The rest will be used to finance the acquisition of bitcoin and for general corporate purposes.
The explicit declaration of wanting to use part of the funds to buy bitcoin once again underscores the company’s positioning as a protagonist in the field of digital infrastructure and energy related to crypto-assets, as well as the particular exposure to market fluctuations of the main cryptocurrency.
What are the technical details of the offer?
The new convertible bonds are debt instruments that grant holders the right to convert them into company shares, under specific conditions. Here are the key points disclosed by MARA:
They will be senior non garantiti e senza cedola (zero-coupon) securities
Conversion rate and final terms established at the pricing determination
The initial conversion price will be calculated using the volume-weighted average price from 2:00 PM to 4:00 PM (Eastern Daylight Time USA) on the pricing date
The maturity is set for August 1, 2032, but with the option for early redemption, repurchase, or conversion
The choice of the time window for the reference price could be strategic: in fact, it tends to avoid manipulations of short-term trading and ensure fair pricing based on actual market volumes and levels.
The term capped call refers to a derivative operation that allows MARA to hedge the risk of dilution in case of bond conversion.
In practice, MARA enters into agreements with other operators (banks and institutional investors) to purchase “protection” in order to absorb sales or the potential increase in stock supply when the bonds are converted.
The counterparties, to hedge their exposures, may be forced to purchase MARA shares directly on the market or subscribe to financial contracts based on the stock.
This can lead to volatility and fluctuations in the stock market in the short to medium term, both during the pricing phase and while awaiting the conversion date.
Those who hold MARA shares will need to closely observe the price evolution, especially in light of the flows related to the capped call operation and the possible future conversion of the bonds.
For potential buyers of the new bonds, the main advantage lies in the conversion possibility that benefits from potential bull of the quotations without direct exposure to the bear of the shares.
The use of proceeds to acquire bitcoin makes MARA one of the few publicly traded companies strategically exposed to this asset, with the consequent risks and growth potential linked to the performance of the cryptocurrency.
Timing will be crucial: everything depends on the final pricing of the operation and the effectiveness of the measures to mitigate dilution.
What to watch in the coming weeks?
The offering of obbligazioni convertibili MARA represents a key test for investor confidence and the company’s ability to raise capital in institutional markets.
Monitoring the stock price, the final pricing details, and the execution timing of the capped call is essential to assess risks and opportunities.
The futuro di MARA now depends on the market response and the next moves on the “bitcoin & digital infrastructure” strategy: everything can change in the coming weeks, especially if volatility increases.
Follow the finance and crypto communities for real-time updates on the dynamics of MARA and market reactions.
