MicroStrategy Acquires Additional $786 Million in Bitcoin Following Convertible Note Sale

MicroStrategy Acquires Additional $786 Million in Bitcoin Following Convertible Note Sale

Bitcoin development firm MicroStrategy has significantly increased its cryptocurrency holdings with the acquisition of an additional 11,931 BTC, announced on Thursday. This purchase raises the company’s total Bitcoin reserves to 226,331 coins.

Nearly 12,000 Bitcoins Added to MicroStrategy’s Portfolio

The latest acquisition, valued at $786 million, was funded through a recent convertible debt offering that successfully raised $800 million upon its closing on June 18. MicroStrategy reported an average purchase price of $65,883 per Bitcoin for this transaction.

This marks another instance of successful debt issuance by MicroStrategy, attracting investors who accepted the company’s offered minimum annual yield of 2.25% on the convertible bonds. Additionally, investors have the option to convert their investments into MicroStrategy stock (MSTR) at a rate of $2,043.32 per share—approximately 35% above the current market price—if the stock’s value surpasses this figure before the bonds’ expiration on June 15, 2032. This arrangement effectively provides bond investors with a call option on MSTR stock, ensuring at least a small yield and the return of their principal if the investment does not perform as expected.

Earlier this month, MicroStrategy announced a notice of redemption on its initial round of convertible bonds issued in December 2020. Given MSTR’s significant rise above the conversion rate of $397.77 per share, it is anticipated that investors will convert their shares before the July 11 deadline, potentially leading to substantial dilution of MSTR shares.

MSTR Versus BTC: A Comparative Analysis

In recent years, the price of MSTR stock has closely followed the price of Bitcoin, often exhibiting a volatility multiple of 1.5X compared to Bitcoin’s price movements. Experts, including James Butterfill, Head of Research at CoinShares, have referred to MSTR as a “leveraged play on Bitcoin prices.” MicroStrategy has converted nearly its entire balance sheet into Bitcoin, with the current value of its Bitcoin holdings estimated at $14.7 billion.

Prior to the latest purchase, MicroStrategy had already accrued unrealized profits amounting to 83.7% ($6.3 billion) on its Bitcoin holdings. Michael Saylor, MicroStrategy’s executive chairman, has previously described the company as akin to a Bitcoin ETF with additional benefits, such as modest leverage and the absence of management fees.

However, critics argue that MicroStrategy is overvalued relative to traditional Bitcoin ETFs, citing its $26 billion market cap as nearly double the value of its Bitcoin assets under management (AUM).

Influence on Other Firms

MicroStrategy’s strategy of leveraging capital markets to accumulate Bitcoin has inspired other companies. Notably, Japanese public firm MetaPlanet has begun emulating MicroStrategy’s approach in recent months, demonstrating the growing trend among corporations to use capital markets for expanding their Bitcoin holdings.

In conclusion, MicroStrategy’s substantial Bitcoin purchase highlights its unwavering commitment to the cryptocurrency, while also reflecting broader market trends and influencing other companies to adopt similar strategies.

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