DeFi Convertible Bond Offering ‘a Huge Step Forward for DAOs’
Porter Finance’s product launch enables DAOs, such as the one behind Ribbon Finance, to issue debt the DeFi way
Blockworks exclusive art by axel rangel
key takeaways
- Ribbon DAO will issue $3 million of convertible bonds redeemable until December 4, 2022
- The bonds carry a maximum yield to maturity of 7%
Two months after raising its seed round, DeFi upstart Porter Finance is bringing its first big idea to market.
The platform began offering convertible bonds for a DAO, on Monday, with Ribbon Finance’s DAO (decentralized autonomous organization) as its launch partner.
The convertible bonds — effectively zero-coupon bonds sold to investors seeking a fixed income — are secured by 50,000,000 RBN (Ribbon Finance’s native token) or about 16.1 RBN per bond, according to a prospectus. That equates to about $15.2 million collateralized at 490%.
“This is a huge step forward for DAOs,” Jordan Meyer, Porter Finance founder, said in a statement, who called it “a completely new fundraising option for DAOs and a novel lending opportunity for investors.”
Ribbon DAO has around $170 million in assets under management via Ribbon Finance’s decentralized options vaults (DOV).
The Ribbon Finance protocol, operated via fully on-chain governance by Ribbon DAO, has generated about $4 million in revenues since October 2021, according to a statement.
“Having consistent revenues, a large treasury, and strong execution history, Ribbon is the perfect example of a creditworthy DAO,” Meyer told Blockworks.
The prospectus notes Ribbon intends to use the net proceeds from sales of the bonds “for general purposes, including protocol-owned liquidity and bootstrapping the stablecoin supply in our covered call Fuse pool,” referring to a feature from Rari Capital that lets users borrow stablecoins against their Ribbon vault positions.
“This lets us collateralize our treasury RBN to raise cash today at a predictable rate,” a representative from Ribbon DAO told Blockworks.
“We are willing to give lenders some equity upside in exchange for better interest rates.”
Meyer expects this initial bond offering will catalyze a flood of similar deals.
“We are working to help more DAOs raise using the product and adding new features based on their feedback,” Meyer said. “We now have a large inbound of DAOs looking to follow in Ribbon’s footsteps.”
This story was updated on June 6, 2022, at 7:00 pm E.T. with comments from Ribbon DAO.
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