MicroStrategy Plans to Raise $700M for More Bitcoin

On September 16, MicroStrategy founder Michael Saylor announced that the company is planning its third debt offering of the year. This time, they aim to raise $700 million by issuing convertible senior notes.

The total amount includes an option to add an extra $105 million in notes, which will mature in September 2028. This approach allows the company to tap into additional funds if needed while offering investors the potential to convert their debt into equity later.

MicroStrategy stated that it intends to use the funds raised from this offering primarily to pay off existing debts. Specifically, they plan to redeem $500 million in outstanding senior secured notes.

Beyond debt repayment, the company also has a clear strategy to use a portion of these proceeds to acquire more Bitcoin. They reaffirmed their commitment to their Bitcoin strategy, mentioning that any remaining funds will go toward purchasing more Bitcoin and for general corporate purposes. 

This move aligns with their long-term approach to invest heavily in Bitcoin as part of their corporate treasury strategy.

Fried Thiel, the CEO of Marathon Digital Holdings, commented on this announcement by saying, 

“Well, that’s another 12,500 BTC less for the rest of us to acquire…” 

His remark hints at the idea that MicroStrategy's aggressive acquisition of Bitcoin is reducing the available supply for other investors. 

Meanwhile, well-known Bitcoin critic Peter Schiff responded, “Not again,” expressing his skepticism. He further questioned, “What happens when MSTR is the only buyer left?” suggesting there is a limit to how much debt MicroStrategy can issue to maintain its strategy. Schiff’s comment raises concerns about the sustainability of this approach if market conditions change.

In this debt offering, MicroStrategy will redeem its senior secured notes, which will release approximately 69,080 BTC currently held as collateral. This move will free up these assets, providing the company with more flexibility in managing its Bitcoin holdings. 

Convertible senior notes, which MicroStrategy is using, are a type of debt security. They can be converted into a specific amount of the issuing company’s stock under certain conditions during the bond’s life. They are known as “senior” obligations because they take priority over other types of debt in the event of bankruptcy.

This marks MicroStrategy's third debt offering in 2024. The firm has been actively raising capital this year, having secured about $700 million in a similar offering in March, and another $500 million in June. 

Through these offerings, the company has been able to significantly increase its Bitcoin holdings. As of now, MicroStrategy holds 244,800 BTC, valued at approximately $14.24 billion based on current market prices. Their latest purchase, announced on September 13, involved acquiring 18,300 BTC worth around $1.1 billion.

According to the Saylor Tracker website, MicroStrategy has a dollar cost average of $38,781 per Bitcoin. This average gives them an overall unrealized profit of around 50% on their entire Bitcoin portfolio, indicating a substantial gain on their investments. 

However, despite the company's strong commitment to Bitcoin, MicroStrategy's stock (MSTR) took a hit recently. It fell by 4.9% on Monday, closing at $134.50, according to Google Finance. 

The performance of MicroStrategy's stock has largely mirrored Bitcoin’s price movements. The stock hit a peak in March but has since declined by 30%. Similarly, Bitcoin is currently trading down 21.3% from its peak in March, reflecting the high correlation between the company's fortunes and the cryptocurrency market.