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MicroStrategy to Buy More Bitcoin, Plans to Raise $500M
Key points
- MicroStrategy will buy more bitcoin and is raising debt to finance that purchase.
- The company is offering $500 million in senior convertible notes to institutional buyers.
- MicroStrategy already holds about $14 billion in bitcoin on its balance sheet.
Microstrategy (MSTR) is trying to add more bitcoin (Bitcoin) to its stockpile, and is raising $500 million in debt to facilitate the purchase, along with other corporate purposes, the company announced Thursday.
The debt offering consists of senior convertible bonds scheduled for 2032 and will be open to qualified institutional buyers (QIB)with a 13-day option for initial investors to acquire up to an additional $75 million in notes. These senior unsecured notes will bear interest semiannually, beginning December 15, 2024, until maturity, unless repurchased, redeemed or converted at an earlier date.
MicroStrategy’s Bitcoin Bet
MicroStrategy has become famous in recent years for its bitcoin-focused strategy, led by its former CEO and current Executive Chairman Michael Saylor.
As of April 26, the company owned 214,400 bitcoins which, at today’s prices, assuming no changes in the size of the holding, would be valued at around $14 billion. Any bitcoin purchases in the second quarter would make the company’s 15th consecutive quarter buy cryptocurrency.
Although other companies like Tesla (TSL), Block (sq. m.), and, more recently, Scientific Semler (Small LR) have confirmed they are buying cryptocurrency, no one has a bitcoin hoard even close to the size of MicroStrategy’s.
And, in that sense, the shares of none of the other companies investing in bitcoin show as much correlation with bitcoin prices as MicroStrategy Stocks It does. While the price trend lines for bitcoin and MicroStrategy appear to move in lockstep on the chart below, MicroStrategy shares have outperformed the cryptocurrency since February, roughly coinciding with the company’s Feb. 26 announcement that it was adding 3,000 bitcoins to its portfolio.
Since the beginning of the year, bitcoin prices have increased by about 50%, while MicroStrategy shares have more than doubled.
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But this correlation also works in a negative way. The price of bitcoin has dropped by about 6% in the last week, despite a short-term recovery following the release of Wednesday’s Consumer Price Index (CPI) data for May. MicroStrategy shares are down 9% over the same period.