Coinbase (COIN) shares fell following the announcement of a $2 billion private offering of Convertible Senior Notes, extending the weakness that began after last week’s disappointing quarterly results. The move added pressure on crypto-related stocks, as investors reacted cautiously to the combination of soft earnings and a sizable debt raise.

The crypto exchange plans to offer $1.0 billion in aggregate principal amount of Convertible Senior Notes due 2029 and another $1.0 billion due 2032 in a private placement to qualified institutional buyers under Rule 144A. Coinbase also expects to grant the initial purchasers an option to buy an additional $150 million of each series, potentially bringing the total raise to $2.3 billion.

The notes will be senior, unsecured obligations of Coinbase, accruing interest payable semi-annually. The 2029 notes will mature on October 1, 2029, and the 2032 notes on October 1, 2032, unless earlier repurchased, converted, or, in the case of the 2032 notes, redeemed. The notes will be convertible into cash, Coinbase Class A common stock, or a mix of both, at the company’s discretion.

To hedge potential dilution from these convertible notes, Coinbase plans to enter into privately negotiated capped call transactions with initial purchasers or their affiliates. These capped calls are designed to mitigate the dilution impact upon conversion of the notes and help limit potential cash outflows exceeding the principal. However, the hedging activity—such as buying and selling Coinbase stock or derivatives—may increase stock price volatility in the short term.

The announcement followed the disappointing Q2 earnings, which failed to impress Wall Street. Total revenue for the quarter rose slightly to $1.5 billion from $1.45 billion a year earlier, falling short of the $1.6 billion consensus estimate. Transaction revenue, a key metric, came in at $764 million—below StreetAccount’s $787 million projection.

Retail trading volume, typically more profitable than institutional activity, grew 16% year-over-year to $43 billion. However, this also missed analysts’ estimates of $48.05 billion, reinforcing investor concerns about slowing user engagement and monetization efficiency.

Proceeds from the offering will be used to fund the capped call transactions and for general corporate purposes. These may include working capital, capital expenditures, acquisitions, or repurchases of existing debt, including Coinbase’s 2026, 2028, 2030, and 2031 notes. Coinbase also left the door open to repurchasing shares of its Class A common stock depending on market conditions.