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MicroStrategy has made it clear that the proceeds from this offering, along with the previous $800 million raise, will be used to acquire additional Bitcoin and for general corporate purposes.
MicroStrategy, a Nasdaq-listed company, has announced plans to raise $500 million through the offering of convertible senior notes with the goal of acquiring more Bitcoin. This debt offering closely follows the company’s recent $800 million capital raise, with the proceeds from both intended to bolster MicroStrategy’s Bitcoin (BTC) holdings.
The offering is targeted at qualified institutional buyers through a private placement under Rule 144A of the Securities Act of 1933. Highlighting the strong demand for exposure to BTC, the initial purchasers of the senior notes have been granted an option to acquire an additional $75 million worth of notes within a 13-day period after the initial issuance.
The terms of the notes stipulate that they will pay interest semi-annually on March 15 and September 15, starting in 2024. MicroStrategy has the option to redeem some or all of the notes for cash after March 22, 2028, subject to certain conditions, including a minimum outstanding amount of $75 million.
Holders of the notes will also have the right to request MicroStrategy to repurchase their holdings for cash on September 15, 2028. The conversion of the notes into cash, MicroStrategy’s Class A common stock, or a combination of both is subject to specific events and periods outlined in the offering memorandum.
MicroStrategy’s Commitment to Bitcoin
While the exact interest rate and initial conversion rate will be determined at the time of pricing, MicroStrategy has made it clear that the proceeds from this offering, along with the previous $800 million raise, will be used to acquire additional Bitcoin and for general corporate purposes.
MicroStrategy’s foray into BTC has been remarkable. The company, now positioning itself as a Bitcoin development company, has shown support for the growth of the BTC network. It uses the proceeds from the equity to amass more of the coin, which then serves as its primary treasury reserve asset. So far, it has accumulated a staggering 205,000 Bitcoins, worth over $14 billion at current price. The latest $500 million raise could potentially add another 6,800 Bitcoins to its holdings, assuming Bitcoin remains around the $73,000 level.
MicroStrategy to Capitalize on Increased Demand to Increase Bitcoin Holdings
In a comment by Dylan LeClair, a well-known figure in the BTC community with more than 350,000 followers on X, he analyzed how hedge funds or short speculators could buy MicroStrategy Inc (NASDAQ: MSTR) shares in the market. He said,
Any hedge funds or shorts speculators have a few options:
1) Buy $MSTR, sending shares to a higher premium to $BTC holdings + core business,
2) Attempt to hedge with $BTC spot/futures.
Option 1 results in Saylor selling shares to acquire more $BTC. Option 2 is buying $BTC,…
— Dylan LeClair 🟠 (@DylanLeClair_) March 13, 2024
This implies that regardless of which option hedge funds or short sellers choose, it will result in MicroStrategy selling more shares (hitting the bid) to acquire additional funds, potentially around $500 million, within a few days. This suggests that MicroStrategy may capitalize on the increased demand for its shares or use the proceeds to further increase its Bitcoin holdings.
