MicroStrategy Completes $3 Billion Convertible Note Offering, Eyes More Bitcoin

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As an experienced crypto investor with a knack for spotting trends and navigating market volatility, I must admit that the recent events surrounding MicroStrategy have left me both intrigued and cautious. On one hand, their ambitious Bitcoin acquisition strategy, coupled with their impressive reserve, places them at the forefront of the crypto revolution. On the other, the significant drop in MSTR shares following the offering raises concerns about market sentiment and the potential for further turbulence.

On November 21st, MicroStrategy’s shares significantly decreased by over 25%, going from a peak of $536.70 to $397.28 as per Google Finance records. This drop occurred even after the completion of the offering, which was an important step in MicroStrategy’s Bitcoin acquisition plan.

Details of the Convertible Notes

The recently released 0% convertible senior notes provide a 55% premium, which is equivalent to an estimated exercise price of approximately $672. In other words, bondholders have the choice to exchange their notes for MicroStrategy Class A common stock at a set price. If not exchanged before maturity, these notes will be repaid in full at their face value.

Unlike conventional debt securities, these notes don’t offer periodic returns like interest. Instead, they carry a senior rank, meaning bondholders are given precedence over shareholders in scenarios involving bankruptcy or liquidation.

If MicroStrategy uses all $3 billion from their recent offering to buy Bitcoins at present prices, they’d be able to acquire around 30,600 Bitcoins. This significant purchase would strengthen their status as the public company holding the most Bitcoin.

Expanding the Bitcoin Stash

The new financial strategy expands upon an earlier announcement on November 18, aiming to gather $1.75 billion using zero percent bonds, a sum later boosted to $2.6 billion on November 20. These steps are components of MicroStrategy’s ambitious “21/21” plan, which aims to collectively secure $42 billion – divided equally between equity and debt securities – over the next three years, with the primary goal of acquiring more Bitcoin.

At present, MicroStrategy owns approximately 331,200 Bitcoins, worth more than $32.7 billion, as per the Saylor Tracker, a name that honors its Executive Chairman Michael Saylor. This substantial reserve positions MicroStrategy as a frontrunner among public companies in terms of Bitcoin holdings, outpacing others in this area.

Market Turbulence and Record Volumes

As a researcher, I observed a substantial decline in MicroStrategy’s share prices post its offering, a situation exacerbated by Cirtron Research disclosing a short position on the stock. They posited that MicroStrategy shares had reached an overheated state, and the trading volume was incongruous with Bitcoin’s fundamental values.

Despite the volatility, MSTR remains one of the top-performing US stocks of 2024, with a year-to-date gain of 480%. On November 20, it was the second most-traded stock in the US, as investors grappled with the pros and cons of gaining Bitcoin exposure through MicroStrategy.

On November 21st, the company significantly contributed to the massive surge of trades within the “Bitcoin Financial Ecosystem,” which encompasses U.S. spot Bitcoin ETFs, stocks related to Bitcoin such as Coinbase (COIN) and MSTR. This ecosystem experienced an unparalleled $70 billion worth of trading action.

Bitcoin Nears $100K

In their daring approach with Bitcoin, MicroStrategy is making strides. Currently, Bitcoin’s value stands at approximately $99,423, which is very close to hitting the significant price level of $100,000, as indicated by data from Brave New Coin.

 

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2024-11-23 12:00