Marathon Digital Set for $250 Million Bitcoin Treasury Strategy Amid Favorable Conditions
Marathon Digital Holdings, Inc. recently unveiled plans for a private offering of $250 million in convertible senior notes, with the primary goal of acquiring bitcoin and supporting general corporate activities.
The decision to explore this offering was influenced by Marathon CEO Peter Thiel’s statement last month, indicating the company’s intention to purchase Bitcoin when deemed beneficial from a shareholder perspective.
The offering, designed for qualified institutional buyers under Rule 144A of the Securities Act of 1933, is subject to market conditions. It includes an option for initial purchasers to acquire up to an additional $37.5 million in notes within a specified period post-issuance.
The notes, set to mature on September 1, 2031, will be unsecured senior obligations of Marathon. They will accrue interest semi-annually starting March 1, 2025. Holders of the notes have conversion options, allowing them to convert the notes into cash, shares of Marathon’s common stock, or a combination at the company’s discretion. Redemption of the notes is possible on or after September 6, 2028, under specific conditions, with a stipulation that at least $75 million of the notes must remain outstanding if only a portion is redeemed. Holders also have the right to demand repurchase for cash on March 1, 2029.
The net proceeds from the offering are intended for acquiring additional bitcoin and general corporate purposes, such as working capital, strategic acquisitions, asset expansion, and debt repayment. Notably, the notes will not be registered under the Securities Act or any other jurisdiction’s securities laws and can only be offered or sold in the United States under registration or an applicable exemption.
In 2024, there has been a resurgence in the issuance of convertible bonds, driven by rising interest rates and heightened corporate activity. Convertible bonds offer a unique investment opportunity, blending fixed-income stability with potential equity-like returns, making them attractive in the current economic landscape. The global issuance of convertible bonds is on the rise, with considerable activity in the US market. Marathon’s offering aligns with this trend, allowing investors to engage with a versatile and intricate financial tool.
The trend of companies incorporating Bitcoin as a treasury reserve asset is gaining traction, driven by the digital asset’s potential as a long-term store of value and a hedge against macroeconomic uncertainties. Prominent corporations, including MicroStrategy, Semler Scientific, Metaplanet, Tesla, and Bitcoin miners CleanSpark, Riot, and Hut 8, have integrated Bitcoin into their financial strategies. This shift reflects a broader corporate movement to diversify reserves beyond traditional assets, leveraging Bitcoin’s unique attributes as a decentralized and finite digital asset.
The increasing popularity of spot Bitcoin ETFs has facilitated corporate adoption of Bitcoin, simplifying companies’ access to the digital asset. Despite challenges related to accounting standards and market volatility, the strategic utilization of Bitcoin as a reserve asset continues to attract interest as companies recognize its potential to enhance financial resilience and appeal to investors seeking innovative asset management approaches.
The crypto market has witnessed a significant uptrend in 2024, with Bitcoin prices surging over 40% year-to-date. This market environment likely influenced Marathon’s decision to allocate proceeds towards acquiring Bitcoin, capitalizing on the digital asset’s upward momentum.
