Marathon Digital's stock drops after plans to sell convertible debt

By Tomi Kilgore

Marathon plans to use the proceeds from a debt offering to acquire more bitcoin

Shares of Marathon Digital Holdings Inc. took a hit Monday, after the cryptocurrency miner announced plans for a $250 million debt offering, that could be converted into common stock.

The interest rate of the proposed notes, which will mature in September 2031, has not yet been determined.

The notes will be convertible to cash, Marathon common stock or a combination of both.

Marathon's stock (MARA) slumped 8.2% in morning trading trading, to put it on track for a four-month closing low.

It had tumbled 31.1% amid a three-week losing streak through Friday, which has been the longest such streak since the stock fell for six straight weeks through Oct. 13, 2023.

Marathon said it plans to use the proceeds from the debt offering to acquire more bitcoin (BTCUSD) and for general corporate purposes.

As of June 30, the company owned 18,488 bitcoin at a cost basis of $752.8 million and fair value of $1.16 billion. That's up from 15,126 bitcoin with a fair value of $639.7 million as of Dec. 31.

The company also owned 88.97 million Kaspa with a fair value of $17.1 million as of June 30.

Stocks of companies that issue convertible debt tend to decline because if the debt is converted to common stock, the increase in the number of shares outstanding would dilute the ownership of the current shareholders.

The stock has tumbled 33.4% year to date, while bitcoin has rallied 43.1% and the S&P 500 has advanced 12.5%.

-Tomi Kilgore

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08-12-24 1116ET

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