MicroStrategy's High-Interest Bitcoin Bet Dilutes Shareholders
$MicroStrategy(MSTR)$
Since they try and keep low coupon rates, they're banking on the high implied volatility of the stock by issuing close to the money convertibles.
Here's a recent example :
September 18, 2024 — MicroStrategy® Incorporated (Nasdaq: MSTR) (“MicroStrategy”) today announced the pricing of its offering of $875 million aggregate principal amount of 0.625% convertible senior notes due 2028 (the “notes”).
The conversion rate for the notes will initially be 5.4589 shares of MicroStrategy class A common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $183.19 per share.
This is bad for shareholders because the stock will be diluted at a below market price since these are essentially call options written by the company that are now deep in the money.
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