Mara Holdings Inc. (MARA) is doubling down on its Bitcoin investment strategy. The company announced a substantial $700 million private offering of zero-coupon convertible senior notes due in 2031, hot on the heels of a $1 billion offering of similar notes in November. This aggressive capital raise demonstrates a significant commitment to accumulating more Bitcoin (BTC/USD) and reflects a growing trend in the use of innovative financial instruments for cryptocurrency investments.
This latest offering targets qualified institutional buyers. The notes will carry 0% interest and no accretion of principal, according to the company’s press release. Crucially, the specific interest rate, initial conversion rate, and other key terms will be finalized during the pricing of the offering. A significant portion of the proceeds from this offering will be directly allocated to further Bitcoin acquisitions, with the remainder used to repurchase existing convertible notes due in 2026 and for general corporate purposes.
The previous $1 billion offering, completed in November, provides context. After accounting for discounts and commissions paid to initial purchasers, MARA netted approximately $980 million. A substantial portion of this – $199 million – was used to repurchase $212 million in aggregate principal amount of its existing convertible notes due 2026. The remaining funds were also directed towards Bitcoin purchases and general corporate operations. The conversion price for the November notes represented a premium of roughly 42.5% compared to MARA’s midday share price of $18.1848 on November 18th.
This strategy of issuing convertible notes is a key element of MARA’s strategy. These notes represent a hybrid financial instrument that can be exchanged for company equity at a later date. While offering 0% interest, they offer distinct advantages for investors, particularly in the event of bankruptcy. Bondholders (the note holders) enjoy repayment priority over shareholders, providing a level of security. Simultaneously, the conversion feature allows debt holders to participate in any future equity appreciation.
MicroStrategy Inc. (MSTR), a prominent player in the Bitcoin investment space, has adopted a similar strategy, utilizing 0% convertible notes to acquire cryptocurrency. Michael Saylor, CEO of MicroStrategy, highlighted MARA’s recent announcement, emphasizing the company’s commitment to the ‘Bitcoin Standard.’
As of December 2nd, MARA held 26,842 Bitcoins, valued at approximately $2.54 billion, based on data from Benzinga Pro. This represents an average acquisition price of $94,966 per Bitcoin. However, it is important to note that the value of Bitcoin fluctuates significantly, impacting the overall value of MARA’s holdings. In premarket trading on Monday, MARA shares were down 1.97% at $26.88 per share, while Nasdaq 100 futures were slightly up. Despite this recent dip, MARA’s performance over various timeframes reflects significant growth: a year-to-date increase of 19.58%, 40.04% in the last six months, and 76.90% in the last month. This contrasts with the Nasdaq 100 Index’s 26.51% year-to-date growth.
Analyst sentiment is mixed. According to Benzinga, the consensus price target for MARA is $23.83, based on ratings from 17 analysts. The range of predictions is wide, from a high of $66 (Compass Point, March 8, 2022) to a low of $4 (Jefferies, January 9, 2023). The average price target from Barclays, Compass Point, and Macquarie is $27, implying a slight downside potential.
The continued large-scale Bitcoin acquisitions by MARA and the use of innovative financing approaches underscore the ongoing interest in cryptocurrency within the broader financial markets, and highlight the evolving strategies employed by companies looking to navigate the complexities of this volatile yet potentially lucrative asset class.
