MicroStrategy Offers $700M in Convertible Notes to Buy More Bitcoin

Key Takeaways

• MicroStrategy is issuing convertible senior notes to buy more Bitcoin.
• The notes offer holders the option to convert them into cash or MicroStrategy’s common stock.
• Michael Saylor’s company is not alone in launching notes to boost its BTC holding.

MicroStrategy has announced plans to issue convertible senior notes, setting the stage for a significant influx of capital.

The decision aligns with the company’s ongoing efforts to fortify its financial foundation and shore up its already substantial Bitcoin reserves.

MSTR aims to strengthen its financial position and expand its Bitcoin holdings by offering these convertible notes. Michael Saylor’s company is not the only one issuing convertible notes to boost its BTC portfolio.

MicroStrategy Launches Convertible Notes

MicroStrategy announced its intention to offer $700 million aggregate principal amount of convertible senior notes in a private placement to qualified institutional buyers.

The company also expects to grant the initial purchasers an over-allotment option for up to $105 million in additional notes.

The notes will be unsecured, senior obligations of MicroStrategy , bearing interest at a rate to be determined, payable semi-annually. The notes will mature on Sept. 15, 2028, unless earlier redeemed or converted per their terms.

Under certain circumstances, MicroStrategy can redeem the notes for cash before their maturity date. At the same time, holders may also require MicroStrategy to repurchase the notes for cash, subject to specified conditions and procedures outlined in the indenture governing the notes.

The notes will be convertible into cash, shares of MicroStrategy’s class A common stock , or a combination of both, with the interest rate, initial conversion rate, and other terms to be determined at the time of pricing.

MicroStrategy expects to utilize the net proceeds from the offering to strengthen its balance sheet by redeeming its outstanding $500 million 6.125% Senior Secured Notes due 2028.

Additionally, the company plans to allocate some of the proceeds to acquire more Bitcoin , further bolstering its already substantial holdings.

BTC Bought In 2024

As of August 2024, MicroStrategy remains a leading corporate holder of Bitcoin , amassing a massive portfolio of 226,500 BTC.

This strategic accumulation, initiated in 2020, reflects the company’s unwavering belief in Bitcoin’s long-term potential. The total cost basis of these holdings is approximately $8.3 billion, with an average cost per bitcoin of $36,821.

MicroStrategy’s commitment to Bitcoin has been evident in its aggressive acquisition strategy, exemplified by the purchase of 12,222 BTC in Q2 2024 for approximately $805.2 million.

Top 20 largest Bitcoin holders. l Credit: CoinGecko

In terms of stock performance, MSTR has exhibited significant growth, surging 96% year-to-date to reach a value per share of $134.53. The stock’s peak performance aligns with Bitcoin’s all-time high in March, reaching $191.92.

MicroStrategy’s stock price has generally mirrored the broader cryptocurrency market, demonstrating a strong correlation between the company’s valuation and Bitcoin’s performance.

Who Else Uses Notes to Buy Bitcoin?

MicroStrategy isn’t the only company issuing notes to expand its Bitcoin holdings.

MARA (formerly Marathon Digital Holdings) also recently announced a $250 million private offering of convertible senior notes, set to mature in 2031. The offering, exclusive to institutional investors, includes an option for an additional $37.5 million if initial buyers exercise their option within 13 days of issuance.

These unsecured senior notes will accrue interest semi-annually starting March 1, 2025. Unless repurchased, redeemed, or converted earlier, they will mature on Sept. 1, 2031.

Starting Sept. 6, 2028, MARA can redeem the notes for cash as long as at least $75 million in notes remain outstanding.

Marathon Digital Holdings announced a $250 million convertible notes offering. l Credit: Marathon Digital Holdings

MARA intends to use the net proceeds for Bitcoin acquisitions.

However, it is also for general corporate purposes such as working capital, strategic acquisitions, asset expansion, and debt repayment. The notes, as well as any related MARA common stock, will not be registered under the Securities Act or other applicable securities laws.

Similarly, Metaplanet recently launched a similar strategic initiative to buy more Bitcoin.

The company aims to offer shareholders up to 10 billion yen (approximately $69 million) in unlisted stock acquisition rights. Metaplanet will allocate 8.5 billion yen ($59 million) toward Bitcoin investments.