Convertible Note Deals Hit IREN and Kindly MD Stocks
Shares in Bitcoin miner IREN and treasury company Kindly MD have closed with losses on Tuesday after each announced multimillion-dollar convertible note deals amid a slowdown in venture capital activity in the crypto sector.
Shares in IREN (IREN) finished Tuesday’s trading session with a gain of 6.81% but dropped 4.9% after the bell to trade at $58.66 following the company’s announcement of an $875 million convertible senior note offering.
Healthcare company Kindly MD, which merged with David Bailey’s Bitcoin firm Nakamoto, also said on Tuesday that it opted into a $250 million 5-year convertible note deal with fintech company Antalpha, which also seemingly spooked shareholders.
Kindly MD (NAKA) saw a 0.97% drop on the day and shed an additional 2.83% to trade at $0.99 in after-hours trading.
Digital assets continue to attract interest from institutional investors, but Galaxy Research’s latest venture capital report found there was a 59% decline in available funding and a 15% drop in deal count compared to the previous quarter.
IREN raising capital for corporate purposes
IREN intends to use a portion of the proceeds from the note offering for general corporate purposes and working capital.
The company also hopes to fund the cost of capped call transactions, which are used to protect against excessive new share creation when a company’s debt is converted into stock by placing a price cap limit.
There are also an additional $125 million of notes on offer for initial purchasers, which can all be converted into shares of the company.
The company said the call transactions are expected to reduce the potential dilution to IREN’s ordinary shares upon any conversion of the notes.
Shareholders are often concerned that convertible note deals will reduce the value and power of the stock they already own.
Nakamoto hoping to buy more Bitcoin
Antalph and KindlyMDs have entered into a non-binding letter of intent for long-term financing in the hope of lessening the “less dilution risk to its stockholders compared to standard convertible debt,” the company said.
The proceeds have been flagged for use in expanding Bitcoin (BTC) holdings in the KindlyMD Bitcoin Treasury, in addition to general corporate purposes.
Funds raised through the financing are also intended to replace an existing $203 million Bitcoin-secured loan from Two Prime Lending Limited.
Related: Crypto treasury share buybacks could signal a ‘credibility race’ is on
Antalpha also providing Bitcoin-backed loan
Pending the completion of the convertible debt facility, Antalpha will provide an interim Bitcoin-backed loan to KindlyMD.
Bailey said the partnership “represents the power of Bitcoin companies backing Bitcoin companies,” and aims to address “today’s financing needs, but we are also laying the foundation for future structures tailored to the unique requirements of Bitcoin treasury companies.”
“This is the first step in what we expect will be a long series of initiatives to benefit our portfolio, our shareholders, and the Bitcoin ecosystem at large.”
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