Smarter Web Company, a UK-listed firm, has raised about £15.8 million (roughly $21 million) by issuing the first Bitcoin-denominated convertible bond in British markets. French asset manager TOBAM fully subscribed to the 12-month, interest-free bond through three of its funds, blending traditional finance with digital assets in an innovative deal.
How the Smarter Convert Bond Works
Smarter Convert features several unique terms designed to balance capital raising and crypto exposure management:
- It carries zero interest and matures in 12 months, with the principal and any conversion settled in Bitcoin.
- Investors can convert the bond into equity at a 5% premium over the £1.95 reference share price (as of August 5), setting a conversion price near £2.05 per share (about $2.73 USD).
- If all bonds convert, Smarter Web would issue roughly 7.7 million new shares.
- The company may force conversion after six months if its share price remains at least 50% above the conversion price for ten straight trading days.
- Should conversion not occur by maturity, Smarter Web will repay 98% of the principal in BTC, with the Bitcoin amount adjusted to market prices at that time.
- To limit volatility, the firm capped BTC purchases under this program at about 30% of its unencumbered Bitcoin holdings.
Strategic Benefits for Smarter Web
This structure offers several advantages for the company’s growth and balance sheet:
- It raises fresh capital without causing immediate dilution for existing shareholders.
- It adds to Smarter Web’s Bitcoin reserve, which now totals around 2,050 BTC (approximately $234 million), including a 225 BTC purchase in July.
- It establishes a regulated-market template for crypto-linked financing, backed by the institutional support of TOBAM, which manages over $2 billion and launched one of the first Bitcoin mutual funds in 2017.
- It lets the company cater to investors seeking digital-asset exposure while still pursuing traditional equity growth.
Risks and Future Outlook
While the transaction marks a milestone, it brings certain risks and wider implications:
- Bitcoin’s price swings can significantly alter the repayment value, adding volatility to Smarter Web’s liabilities.
- UK regulators have yet to finalize rules for crypto-linked debt, leaving room for regulatory uncertainty.
- Smarter Web’s market valuation has surged recently, fueled by retail demand and a growing Bitcoin stash, raising questions about the sustainability of its high share price relative to fundamentals.
Looking ahead, this bond could pave the way for more digital-asset products in mainstream capital markets. As regulators, asset managers, and issuers grow more comfortable with these structures, we may see a broader range of crypto-financed instruments emerge.
