UK-listed Smarter Web Company has raised approximately £15.8 million (about $21 million) by issuing the first convertible bonds denominated in Bitcoin on the UK market. French asset management firm TOBAM fully subscribed to this 12-month zero-interest bond through three of its funds, innovatively blending traditional finance with digital assets.
How Smart Convert Bonds Work
Smarter Convert has several unique terms designed to balance financing and cryptocurrency risk management:
Its interest is zero, maturing in 12 months, with principal and any conversions settled in Bitcoin.
Investors can convert the bonds into shares at a price 5% above the reference share price of £1.95 (as of August 5), with the conversion price close to £2.05 per share (approximately $2.73).
If all bonds are converted, Smarter Web will issue approximately 7.7 million new shares.
If the company's share price remains above the conversion price for at least 50% of the last ten trading days, the company can force conversion after six months.
If conversion fails at maturity, Smarter Web will repay 98% of the principal in BTC, with the Bitcoin amount adjusted based on the market price at that time.
To limit volatility, the company has capped BTC purchases under this plan at around 30% of its unallocated Bitcoin holdings.
Strategic Advantages of Smart Web
This structure provides several advantages for the company's growth and balance sheet:
It raises new capital but will not immediately dilute existing shareholders' equity.
It increases Smarter Web's Bitcoin reserves, which currently total approximately 2,050 BTC (about $234 million), including 225 BTC purchased in July.
It establishes a regulated market template for cryptocurrency-related financing, supported by TOBAM, which manages over $2 billion in assets and launched one of the first Bitcoin mutual funds in 2017.
It enables the company to meet the demand of investors seeking digital asset investments while still pursuing traditional equity growth.
Risks and Future Outlook
Although this transaction marks a milestone, it also brings certain risks and broader implications:
Fluctuations in Bitcoin's price can significantly change the repayment value, thus increasing the volatility of Smarter Web's liabilities.
UK regulators have not yet finalized the rules for cryptocurrency-related debt, creating uncertainty for regulation.
Driven by retail demand and the growing Bitcoin reserves, Smarter Web's market capitalization has surged recently, raising questions about the sustainability of its high stock price relative to fundamentals.
Looking ahead, this bond may pave the way for more digital asset products to be listed in mainstream capital markets. As regulators, asset management companies, and issuers become increasingly familiar with these structures, we may see a wider variety of cryptocurrency financing tools emerge.
