Key takeaways
- MicroStrategy shares finished at a new record high after a $4.6 billion purchase of Bitcoin.
- The company aims to raise $1.75 billion through zero-interest convertible notes to buy more Bitcoin.
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Shares of MicroStrategy (MSTR) soared about 13% to a record closing high Monday after the company revealed it had acquired $4.6 billion worth of Bitcoin and revealed plans to raise 1, $75 billion to acquire more coins.
MicroStrategy’s stock has outperformed many other stocks in the S&P 500 in terms of annual return. Data from Yahoo Finance shows that MSTR has climbed more than 500% so far in 2024, while shares of Microsoft (MSFT) are up about 11%.
At this point, Michael Saylor’s bet on Bitcoin is paying off. Not only is MicroStrategy stock gaining, but its Bitcoin holdings are also generating significant returns.
With 331,200 BTC purchased at an average price of $88,627, the company has approximately $13.7 billion in unrealized profits.
MicroStrategy plans to issue senior convertible bonds with a 0% interest rate maturing in December 2029, using the proceeds to acquire more Bitcoin.
This follows similar debt issuances, including an $875 million convertible senior note issuance in September with a maturity date of 2028, and another issuance in June maturing in 2032.
Through convertible notes, MicroStrategy effectively has access to interest-free/low-interest capital that is used to purchase additional Bitcoin. The company’s bet is on continued growth in the price of Bitcoin over subsequent market cycles.
Convertible notes offer investors the ability to convert their debt into shares of MicroStrategy. This conversion feature is interesting, especially given the company’s impressive stock performance.
If MicroStrategy’s stock continues to rise, bondholders can convert their notes into shares and benefit from that appreciation. If they choose not to convert, they will get their capital back at maturity, making it a low-risk investment.
The key risk lies in the unpredictable volatility of Bitcoin prices. A drastic decline in its value could compromise MicroStrategy’s financial integrity and result in losses.
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