- MicroStrategy looking to invest an additional $400 million worth of securities to purchase additional Bitcoin (BTC)
- A current stockpile of 40,824 BTC as of December 4
- Hoping to reduce the fear of inflation as a result of government stimulus
As cryptocurrencies have been on the rise in recent years, they continue to catch the spark attention from many tech giants globally. MicroStrategy, has just polished their final steps in entering the crypto market, with a focus on Bitcoin, the world’s largest cryptocurrency. Following PayPal and Square, the Virginia-based company selected Bitcoin as their primary reserve asset with a purchase of $250 million for 21,454 BTC.
The mobile software and business intelligence group announced their initial stock of 40,824 BTC in their reserves on Dec. 4, with further plans on expanding according to a filing with the Securities and Exchange Commission (SEC). However, the bull race doesn’t end here.
There’s a spotlight being placed on investors as MicroStrategy announced the issuing of $400 million in senior convertible notes expected by 2025 in addition to their treasury strategy. The notes will be converted into Bitcoin and be available to qualified institutional investors in a private offering. The private offering follows Rule 144A of the U.S. Securities and Exchange Commission (SEC) which determines the restrictions on trades of privately placed securities for qualified institutional buyers. Introduced in 2012, the rule allows for the resale of privately placed securities for shorter holding periods and without the need for SEC registration. MicroStrategy plans to invest its net proceeds from the sale of notes in Bitcoin.
“It will give us the opportunity to earn better returns and preserve the value of our capital over time compared to holding cash.”
The business intelligence group has over a thirty-year reputation of predicting technology trends. They’re initial victors in the enterprise business intelligence software sector with innovative fame in web and mobile intelligence.
A future for MicroStrategy and Bitcoin (BTC)
On op of the senior convertible notes, MicroStrategy plans to implement an additional expansion strategy within two weeks following their initial launch by purchasing an additional $60 million worth of notes. This, however, is dependent on the conditions pertaining to the market and are subject to change at any given time. With that said, nothing is assured with regards to when the offer will be completed.
Nonetheless, the plan for the notes has been determined and it will include two annual interest payments of 0.75% throughout 2021 up until 2025 with payments on June 15 and December 15 of each year. However, the timeline will be determined by the company’s agreement with its investors on the terms of repurchasing, redeeming, or converting the notes. Overall they expect to raise approximately $540 million from the offering.
Following the first half of the agenda, the notes will be available to redeem entirely or allocate a chunk in cash. The notes may be used as a form of cash flow or be converted into class A shares for the company to disburse.
MicroStrategy initially purchased 2,574 BTCs worth roughly $50 million at a price of $19,427 per unit of Bitcoin. This, as a result, puts pressure on the company to use its funds in order to the meet current price levels of the cryptocurrency. With current market rankings, MicroStrategy’s BTC holdings raise the value to approximately $784 million.
Leverage on rising rates
Overall, Bitcoin is gaining a large advantage over MicroStrategy’s investment. With an additional $400 million in the current price, Bitcoin can reach a $20,000 value upturn.
CEO Michael Saylor has a personal stockpile of 17,732 BTC. He noted that the investment is a strategical approach in response to potential US money supply inflation as a result of government stimulus. The co-founder favors Bitcoin and described it as a “reasonable hedge against inflation.” They also stated in a SEC filing that they found higher returns coming from cryptocurrencies than any other investment and portrays them as necessary long-term assets. The company’s stock has since doubled from November and is up around 121% since January, sources say.
This is the first time that a publicly-listed company turns to cryptocurrencies and raises funds solely for the purpose of purchasing Bitcoin.
MicroStrategy Announces Proposed Private Offering of $400 Million of Convertible Senior Noteshttps://t.co/KvZNIbO6Fa
— Michael Saylor (@michael_saylor) December 7, 2020
Despite the norm, the pandemic, on the contrary, has played a catalyst role for Bitcoin triggering concern for inflation. With the macroeconomic impacts of COVID-19 affecting long term treasury strategies, it played as a key driver in determining their capital allocation strategy, which in the end, resulted in their backing for Bitcoin.
“This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and as an attractive investment asset with more long-term appreciation potential than holding cash.” — Michael Saylor, CEO
However, MicroStrategy’s focus on its corporate business strategy remains on growing as a profitable business intelligence firm. Many of their primary areas in which they seek to expand and profit from include Hyperintelligence, Cloud Intelligence, and Embedded Intelligence offerings, said CFO Phong Le.
“Our corporate strategy and two-pronged capital allocation strategy are designed to benefit shareholders, customers, partners, and employees” — Phong Le, CFO
Bitcoin and other cryptocurrencies, however, have a reputation for being volatile and risk levels are unstable. Bitcoin depicted over 80% downfall following their boom at the end of 2017. If Bitcoin continues to push overtime then stock prices for MicroStrategy will remain accelerating and their treasury strategies will prevail.