Block, a Fintech Company, Reveals $1.5 Billion Debt Offering to Drive Expansion and Acquisitions
Block, the fintech company formerly known as Square, has made an announcement on May 6th regarding its plans to issue $1.5 billion in senior notes through a private placement aimed at qualified institutional investors.
The specific terms of these notes, including interest rates and maturity dates, are currently being negotiated with the initial purchasers. Eligible investors for this round include pension funds, banks, mutual funds, and high-net-worth individuals. Following the announcement, shares of Block (NYSE: SQ) experienced a 4% increase, reaching $72.40.
A private placement typically involves the sale of securities to a select group of investors instead of the public market. Block intends to utilize the proceeds from this sale for various purposes, such as repaying existing debt, potential acquisitions and strategic transactions, capital expenditures, investments, and strengthening its working capital.
Fitch Ratings has recognized Block as being in a strong financial position to benefit from the growth in the payments and consumer financial services sectors. Fitch also noted that since going public, Block has primarily used the convertible debt market for external funding. As of March 2024, Block reported approximately $2.15 billion in outstanding convertible notes, a $775 million revolving credit facility available until June 2028, and $2 billion in senior unsecured notes due in 2026 and 2031.
The addition of new debt from this recent issuance is expected to help refinance obligations maturing in 2025 and 2026, while also strengthening the company’s balance sheet. Jack Dorsey, co-founder of Block, has been at the forefront of integrating Bitcoin into the company’s balance sheet. In a recent shareholder letter, Dorsey revealed that Block is committed to allocating 10% of its gross profit from Bitcoin-related products to further Bitcoin purchases every month. This strategy has resulted in the acquisition of $220 million worth of Bitcoin between the fourth quarter of 2020 and the first quarter of 2021.
Block’s financial performance in the first quarter of 2024 has exceeded market expectations. The company’s gross profit from Bitcoin-related activities reached $80 million, accounting for 3% of its total $2.73 billion Bitcoin revenue. Additionally, its mobile payments and cryptocurrency platform, Cash App, recorded $1.26 billion in gross profits for the quarter, representing a 25% increase from the previous year.
Overall, Block achieved a gross profit of $2.09 billion in the first quarter, a 22% increase from the same period last year. Total revenues reached $5.96 billion, and per-share earnings were $0.85, surpassing analysts’ forecasts.