High-profile crypto miner Marathon Digital (NASDAQ:MARA) is bleeding red today. Currently, shares of MARA stock are down more than 11% on heavy volume.
For Marathon, this move appears to be a breather on what has been an impressive month. Indeed, over the past month alone, MARA stock is up more than 40%. And that includes today’s decline.
Interest around cryptocurrency miners has continued to grow, as Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD) both continue to hover around all-time highs. In this environment, crypto miners such as Marathon have shot up the rankings in terms of interest among retail investors.
However, today, there’s a catalyst for this company that investors appear to be viewing negatively. Let’s dive into what Marathon announced and why MARA stock is plunging.
MARA Stock Sinks on Convertible Debt Offering
Today, Marathon announced the company is looking to raise as much as $500 million via convertible debt. These unsecured senior convertible notes would be due in 2026 and provide an option for an additional $75 million in notes to be acquired by initial purchasers.
Notably, the company reported that it intends to use these funds for general corporate purposes. These purposes include acquiring additional Bitcoin or Bitcoin mining machines.
This is groundbreaking news. Most crypto miners to date have relied on equity markets to raise capital. In the case of Marathon, there are a number of investors and analysts who suspected an equity offering would be on the table at some point. However, influencers like MicroStrategy’s (NASDAQ:MSTR) Michael Saylor have noted that such a move has not been factored into anyone’s model. Thus, there’s a bullish stance investors can take on this news.
However, the market appears to be taking a bearish view of this news, given the fact that this issuance was carried out via convertible debt rather than equity. Investors will be stuck with the interest payments on these notes, regardless of where Bitcoin prices move from here. Accordingly, this move appears to add to the risk profile of MARA stock to some degree.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.