Written by Medha Singh and Hannah Lang, this article from Reuters discusses MicroStrategy’s plans to raise capital through convertible bonds in order to buy more Bitcoin. This will be the second time in less than 10 days that the company has taken this approach, as they continue to aggressively invest in the booming cryptocurrency market.
On Wednesday, after the market closed, MicroStrategy announced that it would be offering $500 million in convertible notes due in 2031 to institutional investors. This comes on the heels of a similar private offering of $600 million in convertible notes on March 5th. Despite hitting a 24-year high in the previous session, MicroStrategy’s stock dropped 5% on Thursday. However, it is still up nearly threefold so far this year.
Bitcoin, the world’s largest cryptocurrency, also hit a new record high of $73,803 on Thursday, bringing its year-to-date gains to almost 70%. However, it later dropped below $70,000 and was down nearly 3% for the day. According to TD Cowen analyst Lance Vitanza, the 5% drop in MicroStrategy’s stock is relatively mild, especially considering Bitcoin’s drop of over $2,000.
Based in Tysons, Virginia, MicroStrategy is just one of many companies taking advantage of the high interest rate environment by offering convertible bonds. According to Michael O’Rourke, chief market strategist at JonesTrading, the company is making it clear that the current monetary policy environment is not restrictive. Since late 2020, MicroStrategy has been regularly coming to market with convertible and stock offerings to invest in Bitcoin, and it seems to be becoming a weekly occurrence.
Convertible notes, which can be exchanged for shares when the stock reaches a predetermined level, allow companies to raise capital at lower interest rates than regular bonds without diluting shareholders immediately like stock offerings do. MicroStrategy is offering these bonds at a yield of 0.375%-0.875% with an option to convert when the stock rises 40% to 45% above its current levels, according to LSEG IFR data.
The bookrunners for the deal, Citigroup and Barclays, declined to comment on investor interest in the offering. MicroStrategy, which began buying and holding Bitcoin in 2020, is currently the largest corporate holder of the cryptocurrency. This investment has helped offset a decline in revenue from its software business in 2022 and 2023. In fact, the company has purchased an additional 15,000 bitcoins since February 15th, bringing their total holdings to 205,000 as of March 10th.
In addition to MicroStrategy, cryptocurrency exchange Coinbase also announced an upsized convertible bond offering of $1.1 billion to repay or redeem its outstanding convertible debt and notes maturities. The article concludes by stating that this news was reported by Medha Singh in Bengaluru and Hannah Lang in Washington, with additional contributions from Lance Tupper and Manya Saini. The article was edited by Shilpi Majumdar and Matthew Lewis.
