MicroStrategy You can also read about the importance of this in our article It announced on Friday it was taking steps to reduce corporate debt of $1,05 billion that appeared to be linked to its initial stages. Bitcoin buying scheme.
Michael Saylor is the co-founder of the company and its Executive Chairman. The company now has 461,000 Bitcoins worth almost $49 billion. It’s the biggest corporate Bitcoin holder since August 2020 when it purchased the asset. And it's still buying, adding $1 billion to the pile earlier this week.
The company issued convertible notes in an attempt to purchase more Bitcoins than they could afford. This is a type of debt for the company that can be later converted to shares. MicroStrategy was able to leverage its Bitcoin investment by borrowing capital.
MicroStrategy was the first company to issue convertible notes in years, despite having issued millions of dollars worth last year. The company announced in February 2020 that it completed a similar offering. The convertible notes that were issued in the past raised $1.05 billion and would mature with a 0.0% discount coupon on February 20, 2027.
MicroStrategy announced on Friday that they were redeeming their notes due 2027 and planned to give holders 100% of the principal amount of those notes by February 24, 2019.
MicroStrategy explained that the holders of this note will still be able convert it into stock until the 20th February, effectively paying $142.38 per share, depending on the rate at which the note is being exchanged. Stock in MicroStrategy currently sells for $373.75 a share. This is an increase of 730% over the last 12 months.
By calling for the redemption of its notes ahead of schedule, MicroStrategy is effectively reducing its leverage while pushing out repayment risks to September 2028—when $1.01 billion in notes are set to mature—Michael Lebowitz, a portfolio manager at RIA Advisors told Decrypt.
The company is currently $7.26 Billion in debt and has used all proceeds to increase its Bitcoin stock, according to MSTR Tracker.
“The debt is not necessarily a risk. The risk is that they have to sell Bitcoin to pay off the debt,” Lebowitz said. “Ideally they do want the convertible [notes] converting, so they don't have to really pay it off.”
MicroStrategy announced Friday that certain note conversions would result in a mixture of cash and stock, choosing to pay out fractional shares using U.S. dollar instead.
MicroStrategy moves to a new location Vote among shareholders earlier this week, which increased the firm's number of authorized Class A common shares by 30 times. That move was also conducive with deleveraging the company’s balance sheet, Lebowitz said—but that might not last long.
“Because the company is so popular right now, you can issue that convertible debt so cheaply,” “He said” “In theory, they're going to issue more convertible debt, which would then boost the leverage back up.”
Andrew Hayward is the editor