MicroStrategy Boosts Convertible Debt Offering by 200 Million for Additional Bitcoin Purchases

MicroStrategy Boosts Convertible Debt Sale by $200 Million to Expand Bitcoin Holdings
MicroStrategy, a leading company in the Bitcoin industry, has decided to increase its convertible debt offering to $700 million.
In a recent announcement, MicroStrategy revealed that it has raised its convertible note offering by an additional $200 million, bringing the total sale size to $700 million.
The company also disclosed that the convertible bonds are priced at 2.25% per year, which is higher than the 0.875% rate offered in March but still lower than the Federal Reserve’s current benchmark interest rate of 5.25%.
The offering is set to close on June 17, with the notes maturing on June 15, 2032. The funds raised from this sale will be used to acquire more Bitcoin and for general corporate purposes.
Convertible bonds offer investors a modest interest rate, below the market’s standard lending rate, while also providing the option to convert their investment into company shares at a predetermined rate in the future. This allows investors to benefit if the stock value increases significantly over time.
Investors in the latest offering will have the option to convert their funds at an effective rate of $2,043.32 per share, which represents a 35% premium from the current price. However, if bond buyers choose to convert, it could lead to stock dilution for existing MSTR shareholders.
MicroStrategy’s recent announcement of redeeming its first round of convertible notes issued in December 2020, worth $650 million, has raised questions about the company’s future. Investors have until July 11 to decide whether to convert their notes at the predetermined rate of $397.77 per share, potentially resulting in the dilution of up to 1.6 million MSTR shares.
With 15.77 million shares outstanding and a daily volume of 1.78 million shares over the past three months, some MSTR investors believe that the worst may be over in terms of share dilution.
The future conversions of MicroStrategy’s remaining bonds are expected to result in less dilution compared to the initial offering. Despite concerns of a potential selloff, some investors remain optimistic about MicroStrategy’s outlook.