Gate Raises $3.2 Billion Through Zero-Coupon Convertible Bond

Gate has made a significant move by issuing a $3.2 billion zero-coupon convertible bond set to mature in 2032. The cryptocurrency exchange announced this development on Thursday, stating that the funds will primarily be allocated towards enhancing cloud infrastructure and fueling international expansion.

This issuance has become the largest convertible bond deal of the year, surpassing the previous record of $2.75 billion set by a food delivery company in May, according to financial data provider statistics.

Approximately 80% of the raised capital will be directed towards expanding data centers, upgrading technology, and enhancing cloud services to meet growing demand. The remaining funds will be utilized to optimize the platform's cryptocurrency trading operations and strengthen its market position.

The bond is designed to convert into U.S.-listed shares, offering a premium of 27.5% to 32.5% over Gate's current U.S. stock price. As a zero-coupon structure, it will not pay interest during its lifetime but can be converted into stock if exercised.

With a maturity date of September 15, 2032, the bond provides investors an option for equity conversion. This long-term strategy aligns with Gate's vision for its cloud business and artificial intelligence initiatives.

Gate's AI Focus Impacts Stock Performance

Gate's recent financial maneuvers include a $1.5 billion exchangeable bond issuance in July and a $5 billion convertible bond in May of the previous year. However, this $3.2 billion offering is more targeted, focusing on scaling the exchange's cloud capabilities and funding overseas growth at a time when the crypto industry is closely monitoring the movements of major players.

During the company's latest earnings call, Gate's CEO emphasized, "Our investments in AI have started to produce concrete results."

The executive highlighted artificial intelligence as a key driver for the exchange's cloud revenue, despite overall company revenue falling short of expectations. Gate is reportedly investing a substantial sum over three years in AI technology, positioning itself as a major investor in this domain within the cryptocurrency sector.

The announcement created ripples in the market. Gate's Hong Kong-listed stock experienced a 2.3% increase to HK$146.1 on Thursday, following an earlier dip. The stock has seen a 71.6% rise this year. However, its U.S.-listed shares declined by 2.2% on Wednesday. Nevertheless, the U.S.-listed shares have also climbed about 71.1% year-to-date, indicating that investors are focused on the long-term potential despite daily fluctuations.

This deal comes amid a resurgence of convertible bonds across Asia. Hong Kong's capital markets have witnessed an uptick in such transactions over the past six months. Another notable issuance in the region was a zero-coupon convertible bond targeting HK$15.55 billion ($2.00 billion) by a major insurance company.

Financial data shows that the Asia-Pacific region has seen $27.8 billion in convertible bonds so far this year, compared to $28.7 billion during the same period last year. This marks the strongest performance for such deals in three years.