Marathon Digital Holdings Inc. has announced plans to sell $250 million in convertible senior notes, with the proceeds earmarked for acquiring additional Bitcoin.
Marathon Digital (NASDAQ:MARA) stock slid 12% on Monday after the Bitcoin miner announced plans to raise $250 million through convertible notes, a move that comes as the company is ramping up its BTC (CRYPTO:BTC) acquisition strategy.
What Happened: Marathon said the proceeds from the convertible senior notes will be used to acquire additional Bitcoin. The notes will mature in 2031 and will be offered in a private placement to institutional investors.
The Bitcoin miner said it will have the option to redeem the notes, in whole or part, beginning June 15, 2027, if certain conditions are met, including a sustained decline in Bitcoin prices.
Marathon said the notes will be convertible into shares of its common stock at a rate to be determined. The company also said it may grant the purchasers an option to buy additional shares of its common stock.
The convertible notes will carry a minimum interest rate of 1% per year and a maximum interest rate of 5% per year.
Why It Matters: Marathon, the largest Bitcoin miner in the U.S., is among several public mining companies that have resumed accumulating Bitcoin following the April ‘halving’ event, which reduced mining revenue.
In 2022, many miners had been liquidating their Bitcoin reserves to manage high energy costs and industry challenges.
The ‘holding’ strategy, as it's known in the crypto world, could enhance the market presence of public mining companies as leveraged proxies for Bitcoin prices and boost their stock prices.
"If Bitcoin does well over the next couple of years, then these companies will likely continue to outperform the broader market," Ethan Vera, Chief Operating Officer at Luxor Technology, told Benzinga.
Vera added that the strategy also comes with risks, including the potential for dilution for existing shareholders if the notes are converted into common shares.
On Monday, Marathon’s shares fell 12.1% to close at $14.95. The stock has declined over 34% year-to-date.
Bitcoin was trading close to $33,000 at press time. The apex cryptocurrency is up over 40% from 2023 lows.
As of July 31, Marathon said it held 20,818 Bitcoin and had a total of $1.6 billion in cash and digital assets.
The company reported a net loss of $198.4 million, or 20 cents per share, for the second quarter. The net loss was primarily driven by a $200-million writedown on its digital asset holdings.
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