MicroStrategy Raises $875M In Convertible Notes, Plans Further Bitcoin Purchases

This offering, expected to close by Sep. 19, 2024, is part of the company's strategy to redeem $500 million in outstanding senior secured notes and to allocate the remaining funds towards purchasing additional Bitcoin.

Business intelligence firm MicroStrategy (NASDAQ:MSTR) announced the pricing of its offering of $875 million in convertible senior notes, due in 2028.

This offering, expected to close by Sep. 19, 2024, is part of the company's strategy to redeem $500 million in outstanding senior secured notes and to allocate the remaining funds towards purchasing additional Bitcoin.

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According to a press release, the net proceeds from the offering are estimated at $864.1 million, with a potential increase to $997.4 million if an additional purchase option is exercised by the initial buyers.

The notes, which carry a 0.625% interest rate, will be convertible into cash, shares of MicroStrategy's Class A common stock, or a combination of both, providing flexibility to noteholders.

Led by Executive Chairman Michael Saylor, MicroStrategy began acquiring Bitcoin in 2020, positioning it as a reserve asset within the company's treasury.

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Since then, the firm has grown into the largest corporate holder of Bitcoin, amassing 244,800 BTC, valued at around $14.2 billion at current prices.

Recently, the company disclosed a new Bitcoin purchase worth $1.1 billion, leaving $900 million still available from a prior funding round.

The redemption of the $500 million senior secured notes, scheduled for Sep. 26, is contingent on the success of this new convertible notes offering.

The redemption will release approximately 69,080 BTC that were used as collateral, providing further flexibility to the company's balance sheet.

These trends will be discussed at Benzinga's Future of Digital Assets event on Nov. 19, where the role of Bitcoin in institutional portfolios and broader adoption of digital assets will be key points of focus.

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During market downturns, investors are learning that unlike equities, these high-yield real estate notes that pay 7.5% – 9% are protected by resilient assets, buffering against losses.

The Impact of Bitcoin on MicroStrategy's Balance Sheet

MicroStrategy's balance sheet has undergone a significant transformation since the company began allocating a portion of its treasury reserves to Bitcoin.

As of June 30, 2024, MicroStrategy held approximately $2.44 billion in cash and cash equivalents, down from $4.08 billion at the end of 2021. This decrease is primarily attributed to the company's Bitcoin purchases, which totaled $3.98 billion.

On the other hand, MicroStrategy's total assets increased from $7.06 billion in December 2021 to $8.03 billion in June 2024, largely due to the appreciation of its Bitcoin holdings.

The company's total liabilities also decreased, from $2.2 billion to $1.74 billion over the same period.

Overall, MicroStrategy's balance sheet appears to be stronger, with a lower debt-to-asset ratio and increased liquidity. The company's strategy of holding Bitcoin as a reserve asset has contributed to these positive balance sheet trends.

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