MicroStrategy Bought $786 Million Worth of Bitcoins After Convertible Note Sale

Bitcoin development company MicroStrategy announced on Thursday the purchase of an additional 11,931 BTC, bringing its total holdings to 226,331 coins.

MicroStrategy buys almost 12,000 BTC

The latest purchase – valued at $786 million – was funded by the company’s recent convertible bond offering , which raised $800 million when it closed on June 18. Each coin was purchased at an average price of $65,883.

MicroStrategy has acquired an additional 11,931 BTC for ~$786.0M using proceeds from convertible notes & excess cash for ~$65,883 per #bitcoin. As of 6/20/24, $MSTR hodls 226,331 $BTC acquired for ~$8.33B at average price of $36,798 per bitcoin.https://t.co/jE9dGqqnON

— Michael Saylor⚡️ (@saylor) June 20, 2024

This is another successful bond issue by MicroStrategy, with investors willing to accept the minimum yield of 2.25% per year offered by the company’s convertible bonds. Alternatively, investors can convert their investments into MSTR shares at a price of $2,043.32 per share – about 35% above the current market price – if the value of the stock rises above that level before the bonds expire on June 15, 2032.

For bond investors, this is effectively a call option on MSTR stock, with the minimum promise that they will get their money back, plus a small return if things go badly.

Earlier this month, MicroStrategy announced the redemption of its first round of convertible notes issued in December 2020. Given MSTR’s drastic increase above the set exchange rate of $397.77 per share, investors are expected to convert their shares before July 11, which could result in significant dilution of MSTR shares.

MSTR VS BTC: Which is the better buy?

MSTR’s price has been largely dictated by the price of bitcoin in recent years. Experts like James Butterfill, Head of Research at CoinShares, have called the stock a “leveraged play on bitcoin prices” because the stock’s price typically moves in parallel with the cryptocurrency with 1.5x volatility.

MicroStrategy has converted almost its entire balance sheet into BTC, so the coins on its balance sheet are now worth $14.7 billion. Before the recent purchase, the company had made 83.7% ($6.3 billion) in unrealized gains on its entire Bitcoin stack.

MicroStrategy Executive Chairman Michael Saylor has previously touted the company as a Bitcoin ETF with benefits including the use of modest leverage and no management fee. In contrast, critics have said the company is overvalued compared to typical Bitcoin ETFs, as its $26 billion market cap is nearly twice the size of its Bitcoin AUM.