Updated 18 Jun, 2021

MicroStrategy to Raise $500mn to Purchase More Bitcoin

MicroStrategy to Raise



Key Takeaways:

  • MicroStrategy to raise $500mn to invest in Bitcoin in an announcement by Michael Saylor
  • The company has had a bumpy ride this quarter as Bitcoin’s price is in decline

MicroStrategy To Raise $400mn to Purchase Over 10,000 Bitcoins

MicroStrategy, the software provider that holds over 92,000 Bitcoins, which represent about 80% of its entire company value, is doubling down on its bitcoin investment. Michael Saylor, the CEO of the company, announced that his company has raised $500mn of senior secure debt. The proceeds will be used to add more bitcoins to its current cryptocurrency stash.

In other words, the software firm has borrowed $500mn in junk bonds to purchase roughly 12,500 Bitcoins, based on current market price of around $38,000-$40,000. This would be the company’s third bond sale to acquire Bitcoin in less than a year. MicroStrategy has yet to make the purchase.

Michael Saylor, a long time Bitcoin enthusiast, firmly believes cryptos will outperform sovereign currencies. This year, Bitcoin has become a centric topic of MicroStrategy’s presentation. The company that sells data analytics software and business-related services, has largely shifted its attention to betting big on bitcoin.


Michael Saylor’s Company Struggles in the Second Quarter

Last year, the firm sold over $1.6bn of convertible bonds to purchase a significant stake of bitcoin. Investors seem to be in favor of MicroStrategy as a bitcoin gatherer. Shares of MicroStrategy are up more than 360% from August last year when the company announced its first round of bitcoin purchases.

The price of bitcoin has been in decline in recent months, putting MicroStrategy in an inconvenient place. The company’s stock is down more than 60% from its February peak. Although the firm has paid an average of $24,450 per bitcoin, it’s bet on the volatile digital asset so far in the second quarter is not looking bright. The company expects to post a $284.5mn loss, “based on fluctuations in market price of bitcoin.”

Moreover, MicroStrategy’s equity position at the end of the first quarter showed it had just $365mn of equity, meaning the volatile downward fluctuations in bitcoin’s price have wiped out roughly 75% of the company’s equity base (page 6, second-to-last line).