Marathon Digital Purchases $249M Worth of Bitcoin With $300M Convertible Note Offering

Highlights:

• Marathon acquired $249 million in Bitcoin from a $300 million note offering.
• Now holds 25,000 BTC, the second-largest corporate holder after MicroStrategy.
• The stock price fell 2.26% post-announcement, down 34% over the year.

One of the largest Bitcoin miners, Marathon Digital Holdings Inc. (MARA), has acquired another $249 million worth of Bitcoin after raising $300 million from a senior note offering. On Wednesday, Marathon announced it used part of the note sale proceeds to purchase about 4,144 Bitcoins at an average price of $59,500 between August 12 and August 14, 2024. The company reported that the total revenue from the note sales was $292.5 million.

MARA secures $300M through an oversubscribed offering of convertible senior notes. With proceeds, we purchased 4,144 BTC (valued at approx. $249M), boosting our strategic bitcoin reserve to over 25,000 BTC. Learn more: pic.twitter.com/EKwKW6eSny

— MARA (@MarathonDH) August 14, 2024

The firm announced it will use the remaining funds from the note sales to buy more Bitcoin and for general corporate needs, including working capital, business acquisitions, debt repayments, and asset expansion. After the purchase, MARA now holds a total of 25,000 BTC, worth $1.45 billion at current prices, making it the second-largest corporate holder of Bitcoin after MicroStrategy. MARA noted that the conversion rate for the notes is 52.9451 shares per $1,000 or $18.89 per share. However, this rate may change due to unforeseen events.

Meanwhile, the mining giant stated that the offered notes are MARA’s unsecured senior obligations with an annual interest rate of 2.125%. Interest is payable semi-annually on March 1 and September 1, starting from March 1, 2025. The convertible notes will mature on September 1, 2031. At that time, they can be redeemed or converted into cash, stocks, or both.

This isn’t Marathon’s first strategic BTC purchase. In 2021, MARA invested $150 million in Bitcoins, which are still on the company’s balance sheet. This year, they purchased $100 million in BTC from the open market, bringing Marathon Digital’s total to 25,000 BTC on its balance sheet.

MARA Stock Price Plummets

After announcing plans to sell convertible notes, the firm’s stock price fell significantly by 2.26% to $15.14, according to Google Finance. Over the past year, the price has dropped about 34%.

In August, Marathon’s second-quarter earnings fell short of Wall Street estimates, with revenues of $145.1 million, 9% below expectations. However, it saw a 78% increase compared to Q2 2023. This follows a record low in crypto mining profitability after the Bitcoin halving, which reduced mining rewards by half.

Marathon Digital Expands Bitcoin Mining Portfolio

Bitcoin miner said its current BTC purchase plans aim to explore new market opportunities and reduce debt to strengthen its balance sheet. As part of this strategy, the company acquired three major Bitcoin mining sites in Nebraska and Texas last year and secured 690 operational megawatts (MWs) before this year’s Bitcoin halving. With this acquisition, MARA increased its directly owned and operated Bitcoin mining portfolio from 3% to 45% and cut operational costs at these sites by 20%.

In an official announcement, the Marathon said:

“Our new initiative with the convertible notes issuance positions us to take advantage of favorable market conditions and enhance our operational capabilities, aligning with our long-term financial goals and reinforcing our belief in Bitcoin’s potential as a highly accretive asset.”

Despite easing US CPI inflation, Bitcoin is facing selling pressure. Currently, BTC is trading 4.09% lower at $58,424, with a market cap of $1.152 trillion. However, analysts anticipate that the BTC price rally may continue with expected Fed rate cuts in September.