The prices of the junk bonds of Coinbase have been taking a beating in the midst of underwhelming performance in the first quarter. There have also been fears rising over what could seemingly happen in the case of bankruptcy.
According to the trading data of bonds from Trace Bonds, both of the junk bond offerings of this crypto exchange went down roughly 17% and 5.2% since its first-quarter report on Tuesday where it sat at $63 and $62.31 at the time of writing. Overall, the bonds have gone down by 20% and 19% respectively since the month began.
Coinbase Doesn’t Inspire Confidence In Investors Anymore
Coinbase’s junk bonds are simply forms of corporate debt that are issued by firms that do not have the necessary investment-grade credit ratings. This leads to firms borrowing a certain amount of money through any junk-bond offering and then setting a maturity date- along with a rate of interest that they would be paying on top of the capital that is borrowed. As these junk bonds have a far lower rating of credit, they also command a far higher interest rate than most investment-grade corporate bonds.
In the case of Coinbase, the junk bonds managed to raise around $2 billion in September to completely evenly spread offerings at 3.375% over seven years and around 3.625% over a decade. Notably, both the junk bonds were launched at a price of $100 each, and they have been going downwards steadily since then. The far sharper drop this month does suggest that investors are quickly losing confidence in the crypto exchange as they move forward.
Interestingly, the price of the stock of Coinbase has also gone down by 20% since the date of its first quarterly report, although a lot of the investor sentiment has already turned bearish beforehand- with the price going down by 50% since May began.