(Bloomberg) — Bitcoin miner Marathon Digital Holdings Inc. said it will sell $250 million of convertible senior notes and use the proceeds to buy more of the cryptocurrency.
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The largest US miner announced in July that it was adopting a strategy similar to the one employed by MicroStrategy Inc., which has been accumulating the cryptocurrency for several years in part on a bet the price will rise.
Marathon is one of several public mining companies that have started increasing Bitcoin holdings again in the wake of the April software code adjustment known a the ‘halving’ that slashed revenue. In 2022, many miners were liquidating their coin reserves to stay afloat amid inflated energy prices and a series of meltdowns in the industry.
Miners mint the cryptocurrency through a process where they compete to solve computational puzzles to unlock rewards in exchange for processing the transactions on the Bitcoin blockchain.
The ‘hodling’ strategy, as it is known in crypto, can enhance public mining companies’ status as a leveraged proxy on Bitcoin prices in the stock market and boost their share prices, which is one of the main sources of financing for the miners, said Ethan Vera, chief operating officer at Luxor Technology.
The issuance of convertible notes also raises the likelihood the holdings of existing shareholders can be diluted.
Shares of Marathon fell as much as 12% to $15 on Monday. The stock has dropped around 34% this year, even as Bitcoin has gained around 40%.
In July, Marathon announced that it bought $100 million of Bitcoin. It held 20,818 Bitcoin with $1.6 billion in total cash and the digital asset as of July 31. The Fort Lauderdale, Florida-based company posted a second-quarter net loss of almost $200 million, mostly from the writedown of the value of the digital assets it holds.
The notes, which will be offered in a private placement to institutional investors, mature in 2031, the company said in a statement.
–With assistance from Muyao Shen.
(Adds the share price decline in the seventh paragraph.)
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