MicroStrategy Plans to Raise $500M through Convertible Senior Notes to Expand Bitcoin Holdings
MicroStrategy made an exciting announcement on June 13, revealing its intention to significantly increase its bitcoin reserves. The company, known as MSTR in the financial world, disclosed that it would be issuing $500 million in convertible senior notes maturing in 2032. The funds raised from this offering will be used to acquire more Bitcoin and fulfill other corporate needs.
The senior notes will be unsecured obligations of MicroStrategy, with interest payments scheduled semi-annually on June 15 and December 15, starting from December 15, 2024. The completion of this offering is subject to market conditions, with no definite timing or specific terms guaranteed. MicroStrategy reserves the option to redeem all or part of the notes for cash starting from June 20, 2029, subject to certain conditions.
This private offering is aimed at qualified institutional buyers as defined by Rule 144A of the Securities Act of 1933. Investors will have the flexibility to convert the notes into cash, MicroStrategy’s class A common stock, or a combination of both. The conversion terms, including the rate and price, will be determined at the time of pricing.
MicroStrategy emphasized that the convertible senior notes and any resulting shares of its class A common stock will not be registered under the Securities Act or state securities laws, making them ineligible for offer or sale in the United States without proper registration or exemption.
The company plans to utilize the proceeds from this offering to bolster its Bitcoin holdings and support general corporate activities. This move is in line with Chairman Michael Saylor’s strong belief in Bitcoin as a strategic asset. MicroStrategy currently holds a whopping 214,400 BTC, valued at over $14 billion, solidifying its position as the largest publicly traded Bitcoin holder.
Since 2020, MicroStrategy has been steadily accumulating Bitcoin, considering it a primary reserve asset. However, the company faced a significant net loss of $53.1 million in the first quarter of 2024, primarily due to impairment losses on its digital assets. Despite this, MicroStrategy remains committed to its Bitcoin acquisition strategy, having purchased 25,250 Bitcoins in the first quarter alone.
MicroStrategy’s CFO, Andrew Kang, highlighted the company’s success in raising over $1.5 billion through capital markets to support its Bitcoin acquisition plan. The recent approval of spot Bitcoin ETFs in the U.S. has also contributed to Bitcoin’s price appreciation, increasing institutional demand and regulatory clarity.
Although Bitcoin’s price experienced a notable drop to $69,000 during the US session following strong US Non-Farm Payroll figures, MicroStrategy remains exposed to significant short positions valued at nearly $7 billion. Despite a decrease in short-seller interest, there are still over 18 active short positions against the company, as reported by Fintel’s “The Big Shorts.”