Yesterday we announced the pricing of $1.25 billion aggregate principal amount of Convertible Senior Notes. We wanted to take this opportunity to share our thought process behind this capital raise.

We believe this capital raise represents an opportunity to bolster our already strong balance sheet with low cost capital that maintains operating freedom, minimizes dilution for Coinbase’s stockholders and expands our ability to fuel innovation and growth regardless of market conditions.

Coinbase is in a strong financial position. We have been fortunate to be profitable historically on an Adjusted EBITDA basis and ended Q1 2021 with nearly $2 billion in cash and cash equivalents on our balance sheet. With this backdrop, we have the ability to access additional capital on an opportunistic basis.

The cryptoeconomy is growing at an incredible rate. Crypto market capitalization reached nearly $2 trillion at the end of Q1 2021 compared to $782 billion at the end of Q4 2020. Underpinning this growth is expansion in all aspects of the cryptoeconomy: DeFi, NFTs, global interest in crypto, new market entrants, and new products and services. In order to deliver the best crypto experiences and provide more users access to the cryptoeconomy, we believe it is prudent to further strengthen our balance sheet and ensure we have the resources to execute on our mission and opportunities.

We have taken a thoughtful approach to our capital structure over the years. Our goal has been to raise capital at the lowest cost possible to our shareholders. We pursued a direct listing primarily as we felt it most closely matched the ethos of crypto by providing more open access and transparency with market-driven price discovery but a secondary driver was to avoid the relatively high cost of capital and dilution associated with traditional initial public offerings.

We have chosen to issue convertible notes as we believe doing so offers a low total cost of capital, operating flexibility and minimal dilution for shareholders. Additionally, we entered into capped call transactions with certain financial institutions, which are derivative transactions that are structured to reduce potential dilution and/or offset cash payments made upon conversion of the notes. The combined terms of our convert and capped call result in a maximum of 1.15% potential dilution that our shareholders could experience in the next 5 years (assuming the full greenshoe is exercised, as explained in footnote 11 below). When you compare total dilution from the combination of transactions, we believe that our capital market activities place us at the low end of the range in terms of potential dilution to shareholders relative to other large and high growth technology companies (see chart below for other company examples).

History of Financing Activity by Comparable Large Technology Companies

(two years prior to going public through two years post going public)

In closing, we believe this capital raise puts us in a strong position to fuel growth and expansion and take advantage of the opportunity ahead of us.

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