MicroStrategy to Sell $700M in Convertible Notes for BTC Purchase
MicroStrategy's $700M Convertible Notes for Bitcoin and Debt Buybacks
MicroStrategy (MSTR), a business intelligence firm turned Bitcoin trading vehicle, is set to sell up to $700 million in convertible senior notes. CEO Michael Saylor announced that the proceeds will fund additional Bitcoin purchases and debt buybacks.
This private offering will be “subject to market conditions” and is due in 2028. The notes, which are unsecured senior obligations, will pay interest twice a year. As of June 2024, MicroStrategy's total debt stands at $3.90 billion.
The company has purchased 244,800 BTC worth nearly $10 billion, including an 18,300 BTC purchase worth over $1 billion last week, according to a U.S. Securities and Exchange Commission filing. MicroStrategy intends to use $500 million from this offering to redeem all outstanding senior secured notes due 2028 and the remaining funds to acquire more Bitcoin and for general corporate purposes.
MicroStrategy’s Aggressive Bitcoin Strategy Continues
MicroStrategy, the largest corporate Bitcoin holder, has been consistently increasing its Bitcoin holdings since 2020. With this latest move, the company plans to allocate $523.8 million of the proceeds to redeem its current senior secured notes, which carry a 6.125% interest rate. By redeeming these notes early, MicroStrategy aims to reduce its debt obligations.
The remaining funds will go towards purchasing more Bitcoin. Institutional investors will have the option to buy an additional $105 million in principal amount within 13 days of the notes' issuance. This strategy allows MicroStrategy to improve its debt profile while continuing its aggressive Bitcoin accumulation.
Understanding Senior Convertible Notes
Senior convertible notes are a type of debt instrument that can be converted into company stock under specific conditions. They typically offer lower interest rates compared to regular debt, providing investors with the potential benefit of converting their debt into equity. For MicroStrategy, issuing convertible notes is a way to raise capital without immediately diluting its stock.
Currently, MicroStrategy holds over 244,800 BTC, valued at around $14.2 billion at current market prices. The company recently purchased an additional $1.1 billion worth of Bitcoin, significantly boosting its reserves. CEO Michael Saylor remains bullish on Bitcoin, predicting its value could reach $13 million per coin over the next 21 years.
Shares of MicroStrategy's stock dropped 4.9% on Monday following the announcement.
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