Block Announces $1.5 Billion Private Placement, Plans to Invest More in Bitcoin
Summary:
Block (formerly Square) plans to issue $1.5 billion in senior notes via private placement to institutional investors. The raised funds may be used for debt repayment, potential acquisitions, working capital, and more. Following the news, Block's shares rose more than 4%. The company was one of the first public businesses to invest in Bitcoin and plans to continue doing so, committing 10% of its monthly gross profit from Bitcoin products to further acquisitions. In Q1 of 2024, Block outperformed market expectations with a gross profit of $2.09 billion.
Block, previously known as Square, has shared its plans to float $1.5 billion in senior notes offered to certified institutional investors via private placement on May 6. The terms, including maturity dates and interest rates, would be discussed with the first buyers, said the company. Eligible participants range from pension funds and banks to mutual funds and affluent individuals. Following this news, Block's stocks (NYSE: SQ) experienced a surge of over 4%, leaving its trading rate at $72.40.
Private placement is an approach of augmenting capital by selling shares or securities to an exclusive group of investors, as opposed to public offering. The funds garnered from this sale could be utilized for various functions, including clearing existing debt, potential buyouts, capital expenditures, investments, and running capital, clarified Block.
Fitch Ratings describes Block as "ideally positioned to leverage growth sectors in payments and consumer finance services." On the topic of the fintech firm's debt structure, Fitch observed that Block has been heavily dependent on the convertible debt market to meet its external capital requirements post its IPO. As of March 2024, Block's outstanding convertible notes was roughly $2.15 billion, with a revolving credit facility of $775 million accessible until June 2028, and senior unsecured notes worth $2 billion due in 2026 and 2031.
"Funds from the proposed debt augmentation would add extra debt to its balance sheet, which is anticipated to support the refinancing of debts due in 2025-2026, while also aiding the maintenance of an already robust balance sheet," affirmed Fitch.
In a shareholder's letter, Block’s co-founder, Jack Dorsey, highlighted the company's pioneering role in including Bitcoin (BTC) on its ledger and mentioned its plan to dedicate 10% of its Bitcoin product gross profits each month for BTC procurement. The firm secured Bitcoin valued at $220 million between Q4 2020 and Q1 2021.
"Upon commitment, every month we will invest 10% of Bitcoin product gross profits into Bitcoin procurement."
The first quarter of 2024 saw Block surpassing market projections in terms of earnings. Its Bitcoin gross profit tariff was $80 million, marking 3% of its $2.73 billion Bitcoin revenue. In Q1, the firm's mobile payment and crypto platform, Cash App, recorded a gross profit of $1.26 billion, up 25% YoY.
In comparison to the same quarter from the previous year, the first quarter's total gross profit was $2.09 billion, an increase by 22%. The company reported a total revenue of $5.96 billion, with per-share earnings standing at $0.85, which exceeded analysts' estimations. Magazine: "'Crypto is unavoidable' hence we went 'all-in' — Introducing Vance Spencer, permabull.
Published At
5/6/2024 8:05:35 PM
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