MicroStrategy to Offer $500M in Convertible Senior Notes to Buy More Bitcoin

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Hassan Shittu

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Hassan Shittu

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June 13, 2024

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MicroStrategy announced on June 13 a move to increase its bitcoin holdings massively.According to the announcement, MicroStrategy (MSTR) will issue $500 million in aggregate principal amount of convertible senior notes maturing in 2032. The proceeds from this offering will be used to acquire additional Bitcoin and address other corporate needs.

MicroStrategy: $500M To Buy More Bitcoin

The notes will be unsecured senior obligations of the company, with interest payable semi-annually on June 15 and December 15, starting December 15, 2024. The offering’s completion is subject to market conditions, and there is no guarantee regarding the timing or specific terms. From June 20, 2029, MicroStrategy may choose to redeem all or part of the notes for cash, subject to certain conditions. The private offering targets qualified institutional buyers as defined by Rule 144A of the Securities Act of 1933.

https://twitter.com/saylor/status/1801202266768326895

Investors can convert the notes into cash, MicroStrategy’s class A common stock, or a combination of both, providing a versatile financial instrument aligned with the company’s growth and investment strategy. The specific conversion terms, including the rate and price, will be determined at the offering’s pricing.According to the press release, the convertible senior notes and any shares of MicroStrategy’s class A common stock resulting from conversions will not be registered under the Securities Act or state securities laws, making them ineligible for offer or sale in the United States without registration or an applicable exemption.Ultimately, MicroStrategy plans to use the proceeds from this offering to strengthen its Bitcoin holdings and support general corporate purposes. This move aligns with Chairman Michael Saylor’s commitment to Bitcoin as a strategic asset. MicroStrategy proudly holds 214,400 BTC, valued at over $14 billion, making it the largest publicly listed Bitcoin holder.The company began accumulating Bitcoin in 2020, adopting it as a primary reserve asset.

Massive Net Loss In Q1 and Facing $7B Short Position

MicroStrategy reported a net loss of $53.1 million, or $3.09 per share, for the first quarter of 2024. This loss was largely due to substantial impairment losses on its digital assets, totaling $191.6 million compared to $18.9 million in the same period in 2023. The company’s revenue declined 5% year-over-year to $115.2 million while operating expenses surged by 152.8% to $288.9 million.The company’s Bitcoin holdings have grown greatly, totaling 214,400 BTC acquired at $7.54 billion. In the first quarter alone, MicroStrategy purchased 25,250 Bitcoins for $1.65 billion, reflecting an average price of $65,232 per Bitcoin.MicroStrategy CFO Andrew Kang noted that the company raised over $1.5 billion through capital markets, aiding its continuous Bitcoin acquisition strategy. The approval of spot Bitcoin ETFs in the U.S. has also been highlighted as a key factor in Bitcoin’s price appreciation, boosting institutional demand and regulatory clarity.Notably, during the US session, Bitcoin’s price dropped significantly to $69,000 following the release of stronger-than-expected US Non-Farm Payroll (NFP) figures.This decline impacts MicroStrategy, which holds a substantial amount of Bitcoin and is facing significant short positions valued at nearly $7 billion. Despite the notable decrease in short-seller interest, there are still over 18 active short positions against the company, per Fintel’s “The Big Shorts.”