Key Takeaways:
Bitcoin development and business intelligence firm MicroStrategy has bought a record $4.6 billion worth of Bitcoin as part of its plans to tap into the capital markets to accelerate purchases of the leading crypto asset. Following the announcement, the company’s share, MSTR, soared 13% to a record closing high on Monday.
MicroStrategy Buys 51,870 BTC Valued At $4.6 Billion To Increase Bitcoin Holdings
According to its filing with the U.S. Securities and Exchange Commission (SEC), the enterprise software developer acquired about 51,780 BTC between November 11 and November 17. This follows the purchases of over 27,000 BTC in October and two large acquisitions in September.
The Virginia-based tech firm is the world’s largest corporate holder of Bitcoin, owning around $30 billion worth of the flagship digital currency in its reserves.
MSTR has outperformed several other stocks in the S&P 500 index with regard to year-to-date return. As per data from Yahoo Finance, MicroStrategy’s stock value has surged over 500% so far in 2024. For comparison, Microsoft’s MSFT has been up around 11% this year.
MicroStrategy’s chairman Michael Saylor took a massive bet on Bitcoin in 2020 when he proposed the idea of holding the crypto asset in its treasury as a hedge against inflation. Four years later, his bet on the apex cryptocurrency is paying off substantially. While the price of its stock soared, the company’s Bitcoin holdings have also yielded huge returns.
The firm initially used cash to make purchases but has now shifted to using the proceeds from the issuance and sale of stock, and convertible debt sales to leverage its Bitcoin buying power. On October 30, MicroStrategy revealed that it hired banks to help raise $42 billion through the sale of new shares and fixed income to acquire more Bitcoin.
The company tapped its “at-the-market” program to sell 13.6 million MSTR shares over the week ending November 17. It is part of the record $21 billion program that will allow MicroStrategy’s banking partners to issue and sell shares to raise capital.
The world’s largest institutional holder of Bitcoin has purchased 331,200 BTC over the past four years at an average price of $88,627 per token or approximately $16.5 billion, which is well below Bitcoin’s market price. The company is now sitting on roughly $13.7 billion in unrealized profits.
MicroStrategy Issues Bonds That Can Be Converted Into MSTR Shares
MicroStrategy has plans to issue senior convertible notes with a 0% interest rate maturing in December 2029, the proceeds of which will be used to acquire more Bitcoin. The strategy follows similar debt issuances from earlier, including the $875 million convertible senior notes offering in September that will mature in 2028, and another issuance in June that will mature in 2032.
Convertible notes will allow MicroStrategy to gain access to low or zero-interest capital that can be used to increase its Bitcoin holdings. The company is betting on the crypto asset to continue its price growth over subsequent market cycles. The convertible notes provide investors with the option to convert their debt into MSTR shares – a feature that is attractive, given the impressive performance of its stock.
When MicroStrategy’s stock rises, bondholders can convert their notes into shares to benefit from the price appreciation. If they choose not to convert, the company will return their principal upon the bond’s maturity.
However, the main risk of this arrangement is the unpredictably volatile nature of the Bitcoin and border crypto market. A drastic decline in its price could compromise the company’s financial integrity, resulting in massive losses.
At the time of writing, Bitcoin (BTC) is trading at $91,938 – up 0.81% over the last 24 hours.
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