Bitcoin News Today: As VC Funding Fades, Crypto Firms Turn to Convertible Debt with Dilution Safeguards

IREN and Kindly MD (NAKA) face market challenges as convertible note deals raise concerns over dilution and capital allocation in a crypto sector grappling with waning venture capital interest. IREN, a high-performance computing firm, announced an $875 million convertible senior note offering, with an option for underwriters to purchase an additional $125 million, to fund operations and capped call transactions. The stock initially rose 6.81% during regular trading but dropped 4.9% post-market to $58.66, erasing much of its 1,000% surge from April lows driven by AI infrastructure demand. Meanwhile, Kindly MD, which merged with Bitcoin firm Nakamoto, secured a $250 million 5-year convertible note with fintech firm Antalpha. Its shares fell 0.97% during the day and an additional 2.83% in after-hours trading to $0.99.

The convertible notes aim to mitigate share dilution through capped call transactions, which limit new share creation upon conversion. IREN's offering is structured to reduce potential equity dilution if the notes convert into stock, while Kindly MD's deal seeks to expand its Bitcoin treasury holdings and replace a $203 million Bitcoin-secured loan from Two Prime Lending. Antalpha also provided an interim Bitcoin-backed loan to Kindly MD pending the convertible debt facility's completion, a move the company described as foundational for future structures in the Bitcoin treasury sector.

Market reactions underscore investor skepticism about the dilutive risks of convertible debt. IREN's stock, despite its recent AI-related gains, now trades at levels reflecting concerns over the capital raise's impact on equity value. Similarly, Kindly MD's shares have faced pressure as the convertible note's terms and the broader crypto market's volatility weigh on sentiment. Galaxy Research noted a 59% decline in venture capital funding for crypto projects in the latest quarter, exacerbating worries about overleveraging and capital efficiency.

The deals highlight a broader trend of crypto firms pivoting to alternative financing amid tightened VC markets. IREN's notes, maturing in July 2031, are unsecured and convertible into shares or cash, with proceeds allocated to general corporate purposes and capped call transactions. Kindly MD's arrangement with Antalpha emphasizes reducing dilution risk compared to standard convertible debt, aligning with the company's strategy to bolster Bitcoin holdings while addressing short-term liquidity needs.

Analysts caution that while convertible notes provide immediate capital, they carry long-term risks for shareholder value. The market's mixed response to IREN and NAKA's announcements reflects the delicate balance between securing funding and preserving equity. With crypto venture activity declining and regulatory scrutiny intensifying, these deals signal a shift toward more structured, albeit cautious, capital-raising strategies in an industry navigating post-bubble consolidation.