Coinbase junk bonds tank amid market rout and creditors’ fears
The price of Coinbase’s junk bonds are tanking amid an underwhelming performance in Q1 and fears over what could happen in the event of a bankruptcy.
According to bond trading data from Trace Bonds, both of Coinbase’s junk bond offerings have dropped roughly 17% and 5.2% since its Q1 report on May 10 to sit at $63 and $62.31 at the time of writing. Overall they are down 20% and 19% apiece since the start of this month.
10y coinbase bonds trading at 63 cents on the dollar pic.twitter.com/fqmKmiXk5E
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 (date of return) 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, it raised roughly $2 billion in 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 (COIN) 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.
The major crypto exchange posted Q1 losses of $430 million 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 the fate of
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