MicroStrategy upsizes convertible offering to $700m to buy Bitcoin

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As a researcher with experience in following MicroStrategy’s moves, I find this latest announcement intriguing. The company’s decision to increase the size of its convertible notes offering from $500 million to $700 million shows strong demand from investors. This upsize comes with an attractive interest rate of 2.25% per annum and a conversion rate that offers a substantial premium over the current stock price.

MicroStrategy has revealed the pricing of its convertible senior notes offering of $700 million.

Yesterday, MicroStrategy disclosed an update to their earlier announced securities offering. The initial plan was for a $500 million bond sale, but now they’ve increased it to a potential $700 million. The deal is projected to be completed by June 17, 2024.

MicroStrategy’s senior notes, which are not secured, will accrue an annual interest rate of 2.25%, with semi-annual payments made on June 15 and December 15. The first payment is scheduled for December 15, 2024.

Notes mature on June 15, 2032, unless there’s an early repurchase, redemption or conversion.

MicroStrategy reveals pricing for its convertible notes offering

The statement released by the company on June 14 specifies a conversion ratio of 0.4894 MicroStrategy Class A shares for every $1,000 worth of the notes.

Approximately $2,043.32 is the estimated cost for each share, which signifies a 35% surge above the US composite VWAP of the company’s stock on June 13, 2024. The VWAP on that day was $1,513.46.

In their recent announcement, MicroStrategy disclosed that qualified institutional buyers have the opportunity to purchase an extra $100 million in addition to the initial $700 million offering they announced on June 13. Previously, the June 13 proposal mentioned an additional $75 million of the total principal amount.

Thursdays saw MicroStrategy making an announcement: they would be redeeming $650 million worth of convertible notes maturing in 2025. This redemption would be settled by sharing MicroStrategy stocks instead of cash following conversion requests. The chosen redemption date is July 15, 2024.

$700m to buy Bitcoin

The company expects to raise a total of $687.8 million, with the potential for an additional $198.2 million if all optional notes are purchased by the initial buyers.

I’ve noticed that MicroStrategy announced on Thursday its intention to use the funds from a notes offering to buy more Bitcoin. At present, my company holds approximately 214,400 Bitcoins, making it the largest corporate ownership outside of BlackRock’s substantial stash backing its spot ETF.

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2024-06-14 16:38