Fintech company Block, formerly known as Square, has recently announced its plans to raise $1.5 billion in senior notes through a private placement aimed at qualified institutional investors. The terms of these notes, including interest rates and maturity dates, are still 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) saw a rise of over 4%, reaching $72.40.
A private placement involves selling securities to a select group of investors rather than the general public. Block intends to use the proceeds from this sale for various purposes, including paying off existing debt, potential acquisitions and strategic transactions, capital expenditures, investments, and strengthening its working capital.
Fitch Ratings has acknowledged Block’s strong position to benefit from growth in the payments and consumer financial services sectors. Fitch also noted that since its IPO, Block has primarily relied on 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 additional debt from this latest issuance is expected to help refinance obligations maturing in 2025 and 2026 while bolstering the company’s solid balance sheet. Block co-founder Jack Dorsey has been at the forefront of integrating Bitcoin into the company’s balance sheet. In a recent shareholder letter, Dorsey revealed that Block commits 10% of its gross profit from Bitcoin-related products to monthly Bitcoin purchases. This strategy has resulted in the acquisition of $220 million worth of Bitcoin between Q4 2020 and Q1 2021.
Block has also delivered strong financial performance in Q1 2024, surpassing market expectations. The company’s Bitcoin-related gross profit reached $80 million, accounting for 3% of its total $2.73 billion Bitcoin revenue. Additionally, its mobile payments and cryptocurrency platform, Cash App, generated $1.26 billion in gross profits for the quarter, marking a 25% increase from the previous year.
Overall, Block achieved a gross profit of $2.09 billion in Q1, a 22% rise from the same period last year. Total revenues reached $5.96 billion, and per-share earnings stood at $0.85, surpassing analysts’ forecasts.
