MicroStrategy, a leading Bitcoin development company, recently announced an increase in its convertible debt offering to $700 million. The company raised the offering by $200 million, bringing the total size of the sale to $700 million. The pricing of the convertible bonds was revealed to be at a rate of 2.25% per year, above the 0.875% offered in March. The offering is expected to close on June 17, with the notes maturing on June 15, 2032. Proceeds from the sale will be used to acquire additional Bitcoin and for general corporate purposes.
A convertible bond is a debt obligation that pays investors a modest interest rate but also allows them to convert their funds into shares of the company at a predetermined conversion rate in the future. The latest offering will allow investors to convert their funds at an effective rate of $2,043.32 per share, representing a 35% premium from its current price. However, if bond buyers willingly convert, there will be stock dilution for current MSTR investors. MicroStrategy estimates that the net proceeds from the sale of the notes will be approximately $687.8 million.
On Thursday, MicroStrategy announced that it had delivered a full notice of redemption on its first round of convertible notes issued in December 2020 to purchase Bitcoin for $650 million. Note holders have until July 11 to exercise their option to convert their notes at the predetermined rate of $397.77 per share. This conversion could result in the dilution of up to 1.6 million MSTR shares. Despite the potential dilution and selloff, some MSTR investors believe that the worst is over for MicroStrategy regarding share dilution. Future conversions of all the remaining bonds together would result in less dilution than that of its first offering.
MicroStrategy’s current shares outstanding are 15.77 million, with a daily volume of 1.78 million shares over the past three months, according to Yahoo Finance. While the dilution could potentially lead to a selloff, some investors remain optimistic about the future of MicroStrategy, believing that the worst is behind them in terms of share dilution. The company’s decision to raise the convertible debt offering to $700 million indicates its continued commitment to acquiring more Bitcoin and pursuing strategic goals for future growth.
Overall, MicroStrategy’s recent move to increase its convertible debt offering reflects its ongoing efforts to strengthen its position in the market and expand its Bitcoin holdings. Despite potential stock dilution and market uncertainties, the company remains focused on its long-term vision and goals. With the offering set to close on June 17, investors will be monitoring the market closely to assess the impact of this latest development on MicroStrategy’s future performance and potential for growth.
