Crypto miner Marathon Digital Holdings is borrowing $500 million to buy bitcoin

• Marathon Digital plans to sell $500 million in convertible bonds, and some proceeds will go toward buying bitcoin.
• The crypto miner separately said the SEC has asked it for information related to a data center in Montana.

Marathon Digital on Monday said it plans to sell hundreds of millions of dollars worth of debt and use some of the funds it raises to buy bitcoin.

Shares dropped, with pressure also coming after the cryptocurrency miner disclosed receiving a regulatory subpoena related to a data center.

Marathon Digital plans to offer to qualified institutional buyers $500 million of convertible senior notes due 2026, it said in a statement. Initial purchasers will have the option to buy an additional $75 million principal amount of notes, and investors would be able to convert the notes to common stock in certain circumstances and during specified periods, Marathon Digital said.

With potential dilution in view, investors pushed the stock down by 17% to as low as $62.71. There were more than 16 million shares that were exchanged, higher than average daily volume of 11 million shares.

"Marathon intends to use the net proceeds from the offering for general corporate purposes, including the acquisition of bitcoin or bitcoin mining machines," it said. The interest rate, initial conversion rate, and other terms surrounding the bond sale will be determined at the pricing of the offering.

Bitcoin was off 0.7% at $64,062 during Monday's session. Its price has more than doubled in 2021 in reaching record highs above $67,000 and crossing above $1 trillion in valuation.

Separately, the company said that it and some of its executives during the quarter ended September 30 received a subpoena to produce documents and communications about a data center in Hardin, Montana.

Marathon Digital said in October 2020 that it had entered into a series of agreements with multiple parties to design and build a data center for up to 100-megawatts in Hardin.

"We understand that the SEC may be investigating whether or not there may have been any violations of the federal securities law," it said in a 10-Q filing with the SEC. "We are cooperating with the SEC."

Marathon Digital shares have surged by more than 500% during 2021.