MicroStrategy (NASDAQ: MSTR), the largest publicly traded corporate holder of Bitcoin (BTC), has announced an upsized debt offering to fund further cryptocurrency acquisitions.
The company disclosed that it plans to raise $700 million through senior convertible notes maturing in 2032, priced to yield 2.25% annually. Buyers also have the option to purchase an additional $100 million in senior securities.
Details of the debt offering
The $700 million debt offering, initially announced at $500 million, includes an option for initial purchasers to buy an additional $100 million in notes.
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If fully exercised, the total proceeds could reach $786 million. The notes will bear interest at a rate of 2.25% per annum, payable semi-annually on June 15 and December 15, beginning December 2024, with a maturity date in June 2032.
According to MicroStrategy, the notes will be sold in a private offering to qualified institutional buyers under Rule 144A of the Securities Act of 1933.
The conversion rate is set at 0.4894 shares per $1,000 of notes, equivalent to an initial conversion price of approximately $2,043.32 per share. This represents a 35% premium over the volume-weighted average price of $1,513.46 on June 13, 2024. The conversion rate may be adjusted based on certain events.
It has also granted initial purchasers an option to buy up to an additional $100 million in notes within 13 days of issuance. The offering is expected to close on June 17, 2024, subject to satisfaction of customary closing conditions.
Strategic Bitcoin accumulation
Michael Saylor, the chairman and co-founder of MicroStrategy, began investing in Bitcoin in 2020, viewing it as an inflation hedge and an alternative to holding cash.
Since then, the firm has accumulated approximately 214,400 BTC, valued at around $14.22 billion at the time of writing. This substantial holding accounts for over 1% of the total Bitcoin supply, capped at 21 million BTC.
MicroStrategy has aggressively accumulated Bitcoin, utilizing debt to fund its purchases and taking advantage of market volatility.
The company has expressed confidence that Bitcoin will continue appreciating over the long term. By selling convertible senior notes, MicroStrategy gains flexibility, allowing noteholders to convert into MicroStrategy stock before maturity while the company benefits from the funds raised.
MicroStrategy stock performance
Recently, the global investment firm AllianceBernstein issued an “outperform” rating for MicroStrategy, raising the price target for MSTR stock to $2,890 and predicting that Bitcoin could hit $1 million by 2030.
As of writing, MSTR stock was trading at $1,503, reflecting a 1.29% increase in early trading on June 14.
Analysts view MSTR stock as an excellent vehicle for investors seeking exposure to Bitcoin’s potential gains without directly holding the cryptocurrency. This positions MSTR stock to benefit from future increases in Bitcoin’s value.
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