MicroStrategy to Offer $600M in Convertible Notes to Buy More Bitcoin

Business intelligence firm MicroStrategy (NASDAQ:MSTR) continues to ramp up its investment in bitcoin. The company is the largest corporate owner of bitcoin with about 193,000 tokens, and on Monday, it announced plans to raise more money to buy even more bitcoins.

Specifically, MicroStrategy announced its intention to offer $600 million in convertible senior notes due in 2030 to qualified institutional investors. The offering comes at a time when the company’s stock price has been on fire, soaring about 63% year to date to around $1,100 per share.

In a press release issued on Monday, MicroStrategy said it “intends to use the net proceeds from the sale of the notes to acquire additional bitcoin and for general corporate purposes.”

Bullish on bitcoin

MicroStrategy’s recent rise has been tied largely to its investment in bitcoin. The company produces AI-powered analytics software for businesses. However, it also bills itself as the “world’s first bitcoin development company,” committed to the “development of the bitcoin network through our activities in the financial markets, advocacy and technology innovation.”

MicroStrategy began investing heavily in bitcoin in 2020, making the cryptocurrency its primary treasury reserve asset and using cash flows and proceeds from equity and debt financings to accumulate bitcoin.

Since then, the company has bought a total of 193,000 bitcoin valued at $6.1 billion, becoming the largest corporate owner of bitcoin. Last month, it acquired 3,000 bitcoin for $155 million at an average price of $51,813 per bitcoin.

MicroStrategy CEO Michael Saylor remains bullish on the cryptocurrency, calling 2024 “the year of birth of bitcoin as an institutional-grade asset class,” on the fourth-quarter earnings call back in February.

“And so we’ve now completed the first 15 years of the Bitcoin life cycle. And in that first 15 years, it was largely unregulated, retail asset, misunderstood,” Saylor added on the call. “The next 15 years, I would expect, will be a regulated, institutional, high-growth period of Bitcoin, very, very different in many ways from the last 15 years. Bitcoin itself is performing well for a number of reasons, but one reason is because it represents the digital transformation of capital.”

Bitcoin breaks record, then falls

On March 4, when MicroStrategy made the announcement about the convertible notes, its stock price soared some 12% to over $1,356 per share. However, it was down some 16% on Tuesday to around $1,120 per share as of mid-afternoon Eastern time.

Bitcoin had a similar wild ride, spiking to an all-time high of $69,324 on Coinbase as of around 10 a.m. Eastern and breaking the previous high of $69,225 set in November 2021.

However, after hitting that peak, bitcoin started dropping and fell to about $62,000 as of 3 p.m. Eastern, off about 10% from its high.

MicroStrategy’s fortunes are very much tethered to bitcoin by design, for better or for worse. Over the past couple of years, this connection has been for the better, as its stock price has soared alongside bitcoin.

However, it is a volatile asset, so investors interested in MicroStrategy should be cautious, and as with any aggressive growth or volatile stock, it is probably a good idea to consider it as a relatively small part of a well-diversified portfolio.