Fintech firm Block — formerly Square — announced plans on May 6 to issue $1.5 billion in senior notes through a private placement to qualified institutional investors. 

The company said in a statement that the terms of the notes, including interest rates and maturity dates, are subject to negotiation with the initial purchasers. Investors permitted to join the round include pension funds, banks, mutual funds, and high-net-worth individuals.

Block’s shares (NYSE: SQ) rose more than 4% following the announcement, trading at $72.40 at the time of writing.

Block Inc (SQ) on May 6, 2024. Source: Google Finance

A private placement is a method of raising capital through the sale of securities, such as stocks or notes, to a limited number of investors rather than through a public offering. According to Block, funds raised through the sale may be used for the repayment of existing debt, potential acquisitions and strategic transactions, capital expenditures, investments and working capital.

According to Fitch Ratings, Block is “well positioned to capitalize on secular growth areas in payments and consumer financial services.” 

Regarding the fintech debt structure, Fitch noted that Block has relied on the convertible debt market for most of its external capital needs since its initial public offering (IPO). As of March 2024, the company had approximately $2.15 billion in outstanding convertible notes, a revolving credit facility of $775 million available until June 2028, and $2 billion in senior unsecured notes due in 2026 and 2031. Fitch wrote:

“The announced debt raise would bring additional debt onto its balance sheet, that is expected to ultimately help refinance 2025-2026 maturities, while also providing further cash support to its already strong balance sheet.”

Block was one of the first public companies to add Bitcoin (BTC) to its balance sheet, recently noted the firm’s co-founder, Jack Dorsey, in a letter to shareholders.

Dorsey also revealed the company plans to allocate 10% of its gross profit from Bitcoin products every month for BTC purchases. Block purchased $220 million worth of Bitcoin between the fourth quarter of 2020 and the first quarter of 2021.

“Going forward, each month we will be investing 10% of our gross profit from Bitcoin products into Bitcoin purchases.”

The fintech firm’s earnings beat market expectations in the first quarter of 2024. Block’s Bitcoin gross profit was $80 million, representing 3% of its $2.73 billion in Bitcoin revenue. Its mobile payments and crypto platform Cash App made $1.26 billion in gross profits for Q1 — up 25% from the year before.

Total gross profit for the first quarter reached $2.09 billion, up 22% from the year-ago quarter. The company posted total revenue of $5.96 billion, with per-share earnings of $0.85 — beyond analysts’ predictions.

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