MicroStrategy has completed a $1.01 billion offering of convertible senior notes, which the company plans to use to repay existing debt and purchase additional Bitcoin. This move reinforces the company’s strategy of using cryptocurrency as a key reserve asset.
Allocating Proceeds to Debt Repayment and Bitcoin Purchase
The proceeds from this offering will be allocated to redeem MicroStrategy’s existing senior secured notes and to further invest in Bitcoin, solidifying its approach of holding cryptocurrency as a central element of its treasury reserves.
MicroStrategy’s New Convertible Notes Offering
The newly issued convertible notes will mature in September 2028 and carry an interest rate of 0.625% per year, payable semi-annually. These notes offer the option to convert into cash, MicroStrategy’s Class A common stock, or a combination of both, depending on the company’s discretion.
The initial conversion price has been set at approximately $183.19 per share, representing a 40% premium over the stock’s average price as of September 17, 2024. MicroStrategy plans to use part of the proceeds to redeem $500 million worth of its 6.125% senior secured notes on September 26.
MicroStrategy Completes $1.01 Billion Upsized Offering of Convertible Notes at 0.625% Coupon and 40% Conversion Premium. $MSTR https://t.co/mJK5xwyn4S
— Michael Saylor⚡️ (@saylor) September 20, 2024
Plans for Additional Bitcoin Purchases and Early Redemption Option
Beyond debt repayment, the remaining funds will be allocated towards purchasing additional Bitcoin and addressing other corporate needs. The company has also introduced an early redemption option starting in December 2027, allowing MicroStrategy to repurchase the notes under certain conditions. However, if less than the total amount is redeemed, at least $75 million of the notes must remain outstanding.
Regulatory Considerations for the Offering
The offering was conducted under Rule 144A, targeting qualified institutional buyers. MicroStrategy emphasized that neither the offering nor the issuance of shares upon conversion has been registered under the Securities Act, keeping the transaction within the realm of private placements.
Increasing the Convertible Debt Offering to $875 Million
MicroStrategy recently raised its convertible senior note offering by $175 million, increasing the total to $875 million. Initially announced as a $700 million offering, the company expanded it to refinance existing debt and acquire additional Bitcoin.
This expanded offering, maturing in 2028, strengthens MicroStrategy’s aggressive strategy in the cryptocurrency market, with Bitcoin remaining at the core of its treasury management strategy.
