Galaxy Digital’s stock fell 7% after the company said it will sell $1.15B of bonds that holders can swap for company stock. The deal alters cash needs and the equity risk profile because future conversions add shares and can invite selling. Portfolio and risk managers now have new inputs for hedging and allocation across the stock, options, and bitcoin-linked assets.
Galaxy Digital will issue $1.15B of exchangeable bonds, and traders responded by knocking the share price down 7%. A bond you can swap for stock is still a loan that pays interest, yet it also gives the holder a right to claim shares later.
Two worries follow: if many bondholders swap, dilution appears as new shares reduce each old share’s slice of the company; and with more borrowing, the balance sheet carries more debt and credit risk rises.
For derivatives desks, the prospect of new shares forces a reset of hedge ratios. Market makers who sold calls or bought puts may sell more stock to stay neutral, and that extra sell flow can lift option implied volatility.
What happened and why it counts
Extra shares can weigh on the price if swaps occur, keeping pressure on the equity until conversion terms are clear. Desks may widen option bid/ask while they recalibrate hedges, and rebalancing flows can make options markets choppier in the near term.
Cautious funds may trim holdings and move proceeds into bitcoin or BTC ETFs that trade tighter, shifting liquidity across crypto-linked names. The firm owes more cash in coupons and principal, leaving less room if markets turn rough and tightening financial flexibility.
Watch for the filing that lists the swap price, the conversion window, and the bond’s maturity. These details set the exact dilution size and the time window for pressure on the stock; until then, desks keep resizing positions for added liquidity risk and for money that might leave the shares for more liquid crypto products.
The exchangeable-bond sale reshapes Galaxy Digital’s capital structure and near-term trading dynamics, with potential dilution, hedge resets, and flow shifts between the stock and crypto-linked instruments until the full terms are known.
