MicroStrategy is offering $500 million in convertible senior notes to buy more bitcoins

MicroStrategy announced on that it would be massively increasing its Bitcoin holdings. According to the announcement , MicroStrategy (MSTR) will issue a senior convertible note with an aggregate principal amount of $500 million and a maturity date of 2032. The proceeds from this issuance will be used to purchase additional Bitcoin and for other corporate needs.

MicroStrategy: $500 million to buy more Bitcoin

The notes will be unsecured senior debt of the Company, with interest payable semi-annually on June 15 and December 15, beginning on December 15, 2024. Completion of the offering will be subject to market conditions, and there is no guarantee of timing or specific terms.

Beginning on June 20, 2029, MicroStrategy will have the option to repurchase all or a portion of the bonds for cash under certain conditions. The private offering is directed to qualified institutional buyers within the meaning of Rule 144A under the Securities Act of 1933.

https://twitter.com/saylor/status/1801202266768326895

Investors can convert the bonds into cash, MicroStrategy Class A common stock, or a combination of both, providing a versatile financial instrument aligned with the company’s growth and investment strategy.

The exact terms of the conversion, including the interest rate and price, will be determined when the offering is pricing. According to the press release, the convertible senior notes and the shares of MicroStrategy’s Class A common stock resulting from the conversion will not be registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from registration.

Ultimately, MicroStrategy plans to use the proceeds from this offering to strengthen its Bitcoin holdings and for general corporate purposes. This move is consistent with Chairman Michael Saylor’s commitment to Bitcoin as a strategic asset. MicroStrategy holds 214,400 BTC worth over $14 billion, making it the largest publicly traded Bitcoin holder. In 2020, the company began accumulating Bitcoin and using it as its primary reserve asset.

Massive net loss in Q1 and $7B short position

MicroStrategy reported a net loss of $53.1 million, or $3.09 per share, for the first quarter of 2024. This loss was primarily due to significant impairments on its digital assets, which amounted to $191.6 million, compared to $18.9 million in the same period of 2023. The company’s revenue decreased 5% year-over-year to $115.2 million, while operating expenses increased 152.8% to $288.9 million.

The company’s Bitcoin holdings have grown significantly, totaling 214,400 BTC acquired for $7.54 billion. In the first quarter alone, MicroStrategy purchased 25,250 Bitcoins for $1.65 billion, representing an average price of $65,232 per Bitcoin. MicroStrategy CFO Andrew Kang noted that the company raised over $1.5 billion through the capital markets, which benefited its ongoing Bitcoin acquisition strategy.

The approval of spot Bitcoin ETFs in the US was also highlighted as a key factor in the Bitcoin price rise as it boosted institutional demand and regulatory clarity.During the US session, Bitcoin price fell sharply to $69,000 after the US Non-Farm Payroll (NFP) jobs data came in better than expected.

This decline is impacting MicroStrategy, which holds a significant amount of Bitcoin and faces significant short positions worth nearly $7 billion. Despite the notable decline in short seller interest, there are still over 18 active short positions against the company, according to Fintel’s “The Big Shorts.”