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MicroStrategy will buy more Bitcoin and plans to raise $500 million
Key points
- MicroStrategy will buy more bitcoin and is accumulating debt to finance that purchase.
- The company is offering $500 million in convertible senior notes to institutional buyers.
- MicroStrategy already holds bitcoin worth around $14 billion on its balance sheet.
MicroStrategy (MSTR) is trying to add more bitcoin (Bitcoin) to its stockpile, and is raising $500 million in debt to facilitate the purchase, along with other corporate purposes, the company announced Thursday.
The debt offering consists of convertible senior securities scheduled for 2032 and will be open to qualified institutional buyers (QIB), with a 13-day option for early-stage investors to acquire up to an extra $75 million in notes. These senior unsecured notes will bear interest semiannually, beginning December 15, 2024, until maturity, unless repurchased, redeemed or converted at an earlier date.
MicroStrategy’s Bitcoin bet
In recent years MicroStrategy has become known for its bitcoin-centric strategy, led by its former CEO and current Executive Chairman Michael Saylor.
As of April 26, the company owned 214,400 bitcoins which at today’s prices, assuming there is no change in the size of the holding, would be valued at around $14 billion. Any bitcoin purchases in the second quarter would equate to 15 consecutive quarters for the company buy cryptocurrency.
Although other companies like Tesla (TSLA), Block (m2) and, more recently, Scientific Semler (SMLR) have confirmed they buy cryptocurrencies, no one has a bitcoin hoard even close to the size of MicroStrategy’s.
And, in that sense, the shares of none of the other companies investing in bitcoin show as much correlation with bitcoin prices as MicroStrategy Shares does. While the price trend lines for bitcoin and MicroStrategy appear to be moving in tandem in the chart below, MicroStrategy shares have been running ahead of the cryptocurrency since February, virtually coinciding with the company’s Feb. 26 announcement to add 3,000 bitcoins to its portfolio .
Year to date, bitcoin prices have risen about 50%, while MicroStrategy shares have more than doubled.
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But this correlation also works in a negative way. The price of bitcoin has fallen about 6% over the past week, despite a short-term recovery following the release of Wednesday’s Consumer Price Index (CPI) data for May. MicroStrategy shares fell 9% over the same period.