MicroStrategy Boosts Convertible Debt Sale to $700 Million to Expand Bitcoin Holdings
MicroStrategy, a leading player in the Bitcoin space, has decided to increase its convertible debt offering to a whopping $700 million.
The Bitcoin development company, MicroStrategy, made an announcement on Friday about the expansion of its convertible note offering by an additional $200 million, making the total offering now $700 million.
In addition to the increase in offering size, MicroStrategy also disclosed that the pricing of its convertible bonds will be set at 2.25% annually. While this rate is higher than the 0.875% offered earlier in March, it still remains significantly lower than the Federal Reserve’s current benchmark interest rate of 5.25%.
The offering is slated to conclude on June 17, with the notes reaching maturity on June 15, 2032. The proceeds generated from the sale will be utilized to procure more Bitcoin and for general corporate purposes.
A convertible bond is essentially a debt instrument that pays investors a modest interest rate, typically lower than the market rate. However, it also provides investors with the option to convert their funds into company shares at a predetermined rate in the future, potentially benefiting them if the stock value surges over time.
The latest offering allows investors to convert their funds at an effective rate of $2,043.32 per share, representing a 35% premium from the current price. Should bond buyers opt to convert, this would lead to stock dilution for existing MSTR shareholders.
MicroStrategy’s recent announcement about redeeming its initial round of convertible notes issued in December 2020 to purchase Bitcoin for $650 million has sparked some speculation among investors. The redemption promises to reimburse investors 100% of their initial investment.
Note holders have until July 11 to exercise their option to convert their notes at the set rate of $397.77 per share, potentially diluting up to 1.6 million MSTR shares.
Currently, MicroStrategy has 15.77 million shares outstanding, with a daily trading volume of 1.78 million shares over the past three months, as per Yahoo Finance.
Despite concerns about potential stock dilution leading to a sell-off, some MSTR investors are optimistic that the worst may be behind the company in terms of dilution issues. The future conversions of MicroStrategy’s remaining bonds are expected to result in less dilution compared to the initial offering.
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