MicroStrategy Boosts Convertible Debt Sale by $200 Million to Purchase More Bitcoin

MicroStrategy continues to make headlines with its latest debt offering, increasing its convertible note sale by $200 million, raising the total to $700 million. This move underscores the company’s aggressive Bitcoin acquisition strategy.

Increased Debt Offering for Bitcoin

MicroStrategy announced on Friday that it has upped its recent convertible note offering by $200 million. The convertible bonds are priced at 2.25% per year, higher than the 0.875% rate offered in March but still below the Federal Reserve’s current 5.25% benchmark interest rate.

Additionally, the company has granted initial purchasers an option to buy up to an extra $100 million in notes within 13 days from the initial issuance date. The offering is set to close on June 17, with the notes maturing on June 15, 2032. Proceeds will be used to acquire additional Bitcoin and for general corporate purposes.

Convertible bonds provide a modest interest rate and function as a call option, allowing investors to convert their funds into company shares at a predetermined rate, potentially benefiting from stock value increases over time. The latest offering allows conversion at an effective rate of $2,043.32 per share, a 35% premium from its current price, which could dilute current MSTR investors’ shares if the bonds are converted.

MicroStrategy estimates net proceeds from the sale to be approximately $687.8 million, potentially rising to $786.0 million if additional notes are purchased.

Redemption of Previous Convertible Notes

On Thursday, MicroStrategy announced a full notice of redemption for its first round of convertible notes issued in December 2020, which were used to purchase $650 million in Bitcoin. The company promises to repay investors 100% of their initial investment. Note holders have until July 11 to convert their notes at a rate of $397.77 per share, which could dilute up to 1.6 million MSTR shares.

MicroStrategy currently has 15.77 million shares outstanding, with a daily trading volume of 1.78 million shares over the past three months, according to Yahoo Finance. Despite potential dilution concerns, some investors believe the worst is over for MicroStrategy in terms of share dilution, as future bond conversions would result in less dilution compared to the first offering.