Why Marathon Will Offer $500M In Debt To Purchase Bitcoin Mining Equipment

Bitcoin mining company Marathon Digital Holding will expand its operations. The company announced that it will acquire debt for “general corporate purposes”, according to a press release, which includes the purchase of BTC mining equipment.

Marathon will issue $500 million in convertible senior notes set to be expired in 2026 in a private offering. Only qualified institutional investors will be able to participate in the offering, per the release. Early investors will have the option of acquiring an additional $75 million in notes.

Marathon has benefited from the “Great Bitcoin Miners Migration”, the event that expelled large BTC mining operations from China, the company recently beat its Q3 earnings expectations with a 6,000% increase in revenue year-over-year.

The company recorded a 91% increase in its Bitcoin mining operations over the same period, with over 1,200 BTC mined. Marathon holds an estimate of 7,035 BTC valued at over $300 million, according to an official report published on November 10th, 2021.

Expanding on their senior notes offering, Marathon revealed that the debt instruments will be unsecured obligations taken by the company with the potential to change the expiration date if they are repurchased, redeemed, or converted. Investors “will only have the right to convert their notes in certain circumstances and specified periods”, the company added.

The conversions of these notes will be made via cash, Marathon common stock, or a combination of both, the company has not contemplated offering Bitcoin as a redemption option and will have final choice on this item. The company added:

The redemption price will be equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The interest rate, initial conversion rate and other terms of the notes will be determined at the pricing of the offering.

Taking On Debt Against Bitcoin To Expand, The New Normal In Corporate Strategies?
The CEO of MicroStrategy, Michael Saylor, commented on Marathon’s debt announcement. Via his Twitter account, Saylor claimed that the offering is “not factored into anyone’s model” potentially hinting at how a company can grow by using Bitcoin and BTC-related activities debt to expand counting on the cryptocurrency’s future appreciation.

Saylor’s own company has been issuing senior notes at 0% interest, in some cases, to buy Bitcoin. MicroStrategy integrated BTC into their corporate treasury in 2020. Since then, the price of this cryptocurrency has increased by over 400% which has been reflected in the company’s stock price.

Data from Ecoinometrics indicates that MicroStrategy (MSTR) has experienced a 502% increase in its stock price since 2020 while BTC records a 462% and the NASDAQ index a 48.9%. This has made the company a proxy for institutional investors looking to gain BTC exposure without having to break U.S. SEC laws.

Source: Ecoinometrics
In the near future, Marathon could experience the same appreciation and could see a rise in institutional demand,as MicroStrategy did.