DeFi Development Corp. Upsizes Convertible Notes Offering to $112 Million for Solana Purchases

DeFi Development Corp., a firm focused on the Solana ecosystem, has successfully upsized its convertible notes offering to $112 million. The firm initially announced a new convertible notes raise of $100 million before boosting it to $112 million, with an option for initial note purchasers to add a further $25 million in the next seven days. The bulk of the net proceeds from this raise will be used for a prepaid forward stock purchase transaction of around $75 million, intended to allow select investors in convertible notes to hedge their investments.

The remaining net proceeds, which could be around $57 million if the investors purchase the additional $25 million in convertible notes, will be used for general purposes and additional Solana purchases. The firm, which began its Solana treasury strategy in early April, has already accumulated 621,313 Solana or around $95 million via purchases, plus it acquired a Solana validator company. DeFi Development Corp. also raised a $5 billion equity line of credit (ELOC) to help fuel “strategic” Solana purchases.

According to Parker White, COO and CIO of DeFi Development Corp., the decision to use convertible notes with this raise allows the firm to raise capital from convertible bond investors, most of whom do not directly buy equity. Convertible bond investors by their nature are more risk-averse, and are willing to trade some upside exposure for some downside protection. The equity line of credit, on the other hand, allows the firm to raise capital from equity investors who want more upside exposure and are OK with more downside risk.

Raising capital from both types of investors lets the firm maximize the funds it can raise to buy SOL, without diluting shareholders. The prepaid forward is an instrument that allows the convertible bond investors to synthetically short the stock without shorting shares into the market. This also means that if/when the convertible bonds convert into stock, there will not be nearly as much new supply of stock hitting the market, because that stock has already been pre-purchased by DFDV.

Shares of DFDV closed down nearly 3% at $20.39 on Wednesday, still up more than 2,300% year-to-date. The price was down approximately 10% earlier in the day before ticking back up. This strategic move is part of the company's broader plan to expand its Solana treasury, aiming to acquire more SOL tokens and bolster its cryptocurrency strategy.