Andrew Bary
MicroStrategy is taking advantage of its surging stock price to sell a $1.75 billion issue of convertible bonds and plans to use the proceeds to buy additional Bitcoin.
After the close of trading Monday, MicroStrategy said it plans to issue convertibles with an interest rate of 0% in a private offering to qualified institutional investors under rule 144A of the Securities Act of 1933. The deal will likely be one of the larger ones in the convertible bond market this year.
The company sold $1 billion of convertible bonds in late September and is one of the largest issuers of the hybrid securities.
MicroStrategy shares rose 13% to $384.79 Monday after hitting a record high earlier in the session. The stock has risen over 65% since the election on Nov. 5, driven by a 30%-plus gain in Bitcoin, which is trading late Monday at nearly $92,000, up 3% on the session. The stock is up more than sixfold this year.
MicroStrategy has been on a Bitcoin-buying spree this month, selling about $6.6 billion in stock since Oct. 31 and purchasing a like amount of Bitcoin. Its latest Bitcoin purchase of $4.6 billion funded by equity sales was announced early Monday.
MicroStrategy's convertible bond sale is part of a plan by the company called 21-21 to sell $21 billion of stock and $21 billion of bonds over the next three years to fund Bitcoin purchases.
MicroStrategy is getting a 0% rate on the new convertibles because of apparent strong demand for the securities. Most convertibles carry a positive interest rate. One reason for the high demand for its converts is the high volatility in the stock which makes the convertible appealing to convertible arbitragers who buy the convertible and sell the stock. MicroStrategy is among the most volatile big stocks in the market.
The shares are down 1% to $381 in after-hours trading on apparent selling by convert arbitragers ahead of the convertible deal.
MicroStrategy has a market value of about $86 billion and now is valued at nearly three times the value of its Bitcoin holding of 331,200 Bitcoin. The company is the largest corporate Bitcoin holder with more than 1.5% of the Bitcoin outstanding.
The company views its sales of equity and convertibles to buy Bitcoin as accretive to shareholders.
Write to Andrew Bary at andrew.bary@barrons.com
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November 18, 2024 17:57 ET (22:57 GMT)
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