MicroStrategy Takes a Big Risk with a 700 Million Debt Offering to Fund Bitcoin Investments
MicroStrategy, the leading publicly traded company holding Bitcoin (BTC), has announced an increase in its debt offering to finance additional cryptocurrency acquisitions. The company revealed its plan to raise $700 million through senior convertible notes maturing in 2032, priced at a 2.25% annual yield. There is also an option for buyers to acquire an additional $100 million in senior securities.
The initial debt offering of $500 million has now been expanded to $700 million, with an opportunity for initial purchasers to buy an extra $100 million in notes. If fully exercised, the total proceeds could amount to $786 million. The notes will accrue interest at a rate of 2.25% per annum, paid semi-annually on June 15 and December 15, starting December 2024, with a maturity date in June 2032.
MicroStrategy stated that the notes will be offered in a private sale to qualified institutional buyers under Rule 144A of the Securities Act of 1933. The conversion rate is fixed at 0.4894 shares per $1,000 of notes, translating to an initial conversion price of approximately $2,043.32 per share. This represents a 35% premium over the volume-weighted average price of $1,513.46 on June 13, 2024. The conversion rate may be adjusted based on specific events.
Additionally, the initial purchasers have been granted an option to purchase up to an extra $100 million in notes within 13 days of issuance. The offering is anticipated to conclude on June 17, 2024, subject to meeting customary closing conditions.
Strategic Bitcoin Accumulation
Michael Saylor, the chairman and co-founder of MicroStrategy, began investing in Bitcoin in 2020, seeing it as a hedge against inflation and an alternative to holding cash. Since then, the company has amassed around 214,400 BTC, valued at approximately $14.22 billion at the current time. This substantial holding represents over 1% of the total Bitcoin supply, which is capped at 21 million BTC.
MicroStrategy has been actively acquiring Bitcoin, using debt to finance its purchases and capitalizing on market fluctuations. The company is confident in Bitcoin’s long-term appreciation. By issuing convertible senior notes, MicroStrategy gains flexibility, allowing noteholders to convert into MicroStrategy stock before maturity while benefiting from the funds raised.
MicroStrategy Stock Performance
Recently, the global investment firm AllianceBernstein issued an “outperform” rating for MicroStrategy, increasing the price target for MSTR stock to $2,890 and predicting that Bitcoin could reach $1 million by 2030.
As of the latest update, MSTR stock was trading at $1,503, reflecting a 1.29% increase in early trading on June 14. Analysts consider MSTR stock as a great option for investors looking to gain exposure to potential Bitcoin gains without directly owning the cryptocurrency. This positions MSTR stock to benefit from future increases in Bitcoin’s value.
Disclaimer:
The information provided on this website should not be construed as investment advice. Investing involves risk, and capital is at risk when investing.
