MicroStrategy Buys More Bitcoin While Adding Capital Raising Tools
(Bloomberg) -- MicroStrategy Inc. bought Bitcoin for a 12th consecutive week and unveiled details for the sale of perpetual preferred stock to help finance additional purchases of the cryptocurrency.
The Tysons Corner, Virginia-based enterprise software company turned leveraged Bitcoin proxy acquired $1.1 billion of the digital currency from from Jan. 21 through Jan. 26, according to a filing with the US Securities and Exchange Commission on Monday. It owns about $47 billion of Bitcoin, or over 2% of all the tokens that will ever exist.
MicroStrategy is offering an 8% fixed coupon for its $250 million of perpetual strike preferred stock, according to people familiar with the matter. The stock is being offered with a $1,000 conversion price, the people said, asking not to be identified as the information isn’t public. A representative for MicroStrategy didn’t immediately respond to requests for comment.
Co-founder and Chairman Michael Saylor has been ramping up MicroStrategy’s purchases of the cryptocurrency since the election of US President Donald Trump, whom Saylor called “The 1st Bitcoin President,” in a post on X.
The company has been using at-the-market stock sales and convertible debt offerings to fund Bitcoin purchases with the aim of raising $42 billion of capital through 2027.
Hedge funds have been helping to drive the demand as they seek out MicroStrategy for convertible arbitrage strategies by buying the bonds and selling the shares short, essentially betting on the underlying stock’s volatility.
MicroStrategy shares have risen around 600% in the past year. The stock fell about 1.4% to $348.65 as of 9:50 a.m. in New York. Bitcoin fell around 2.5% to $101,953.
Over $1 billion of those convertible notes will now be redeemed earlier than expected. MicroStrategy announced on Friday that its outstanding 0% Convertible Senior Notes due in 2027 will be redeemed on Feb. 24. Notes will reflect a conversion price of $142.38 per Class A common share, according to a statement. The shares closed at $353.67 on Friday.
“Taking maturities out and lengthening that runway will allow investors to focus on what the company is doing rather than on potential impediments to the execution of its strategy,” said Benchmark analyst Mark Palmer, who has a “buy” rating on the stock.
Redeeming these notes early could also allow the company to continue to raise more capital.
“Taking one convert out with a near-term maturity does at least theoretically position the company to be in position to issue another convert with a longer dated maturity, but there are other options that the company has with regard to raising capital, including perpetual preferred stock,” Palmer said.
MicroStrategy plans to offer 2.5 million shares of Series A perpetual strike preferred stock at a liquidation preference of $100 per share. The preferred stock will be senior to Class A common stock and offer a regular quarterly dividend beginning on March 31, according to a SEC filing. The firm announced earlier this month that it planned to raise as much as $2 billion from perpetual preferred offerings in the first quarter.
The company may also opt for more equity offerings after shareholders approved increasing the number of Class A shares 30-fold. The results of the vote on Tuesday allows the company to increase the number of authorized shares of its Class A common stock from 330 million to 10.3 billion and increase the number of authorized shares of preferred stock from 5 million to 1 billion.
MicroStrategy currently has $4.35 billion left of equity offerings under its $42 billion capital plan. Increasing share sales could allow the company to continue to fund additional Bitcoin purchases and cover expenses without having to sell tokens.
“We’ve had and expect to continue to have ample access to liquidity through our capital markets activities and cash flows from operations,” Saylor said in the shareholder vote meeting. “We haven’t sold and don’t intend to sell our Bitcoin to satisfy our interest obligations as they become due.”