MicroStrategy Upsizes Convertible Senior Notes Offering to $700 Million to Fuel Bitcoin Acquisition Strategy

MicroStrategy Incorporated (Nasdaq: MSTR) has announced the pricing of its latest offering of convertible senior notes, increasing the aggregate principal amount to $700 million from the initially proposed $500 million. The company plans to use the proceeds to further bolster its Bitcoin holdings and for general corporate purposes.

The convertible senior notes, due in 2032, will bear interest at a rate of 2.25% per annum, payable semi-annually. The notes will mature on June 15, 2032, unless repurchased, redeemed, or converted earlier. The offering, expected to close on June 17, 2024, has been made to qualified institutional buyers under Rule 144A of the Securities Act of 1933.

MicroStrategy has also granted the initial purchasers an option to buy up to an additional $100 million of the notes, potentially raising the total proceeds to approximately $786 million. The net proceeds, after deducting initial purchasers’ discounts, commissions, and estimated offering expenses, are anticipated to be around $687.8 million.

The notes will be convertible into cash, MicroStrategy’s class A common stock, or a combination of both, at the company’s discretion. The initial conversion rate is set at 0.4894 shares per $1,000 principal amount of notes, translating to a conversion price of approximately $2,043.32 per share. This represents a 35% premium over the U.S. composite volume-weighted average price of MicroStrategy’s class A common stock on June 13, 2024, which stood at $1,513.46.

From June 20, 2029, MicroStrategy may redeem all or part of the notes for cash if the company’s class A common stock maintains a price at least 130% of the conversion price for a specified period. If fewer than all outstanding notes are redeemed, at least $75 million aggregate principal amount must remain outstanding and not subject to redemption.

MicroStrategy, led by Executive Chairman and Bitcoin advocate Michael Saylor, has been a prominent institutional investor in Bitcoin since 2020. The company currently holds 214,400 BTC, valued at approximately $14 billion. The additional funds from this notes offering will further increase MicroStrategy’s significant Bitcoin reserves.

Michael Saylor’s firm has consistently leveraged debt offerings to finance its Bitcoin acquisitions. The strategy aligns with the company’s broader vision of capitalizing on Bitcoin’s long-term potential. Despite the volatility in Bitcoin’s price impacting MicroStrategy’s stock (MSTR), the firm remains committed to its cryptocurrency investment strategy.