MicroStrategy’s Bitcoin Buying Spree Continues
Raising Capital to Fuel Crypto Ambitions
MicroStrategy Inc., a Virginia-based enterprise software company, has purchased an additional $101 million worth of Bitcoin, bringing its total holdings to a staggering $44.3 billion. This move is part of the company’s strategy to aggressively accumulate the cryptocurrency, with co-founder and Chairman Michael Saylor at the helm.
Perpetual Preferred Stock Offering
To fund its Bitcoin buying spree, MicroStrategy plans to raise up to $2 billion through a perpetual preferred stock offering in the first quarter. This move is expected to attract a new investor base, including insurance companies, pension funds, and banks, which are drawn to the lower volatility of preferred stock.
Capital Raising Strategy
MicroStrategy’s approach to raising capital is centered around its ability to tap into the convertible bond market, which is fueled by the volatility of its stock price. This strategy has allowed the company to raise significant funds, with over two-thirds of its equity goals already met. Saylor expects to shift focus towards fixed-income markets in the first quarter.
Bitcoin Holdings to Increase
The recent buying and impairment losses will increase MicroStrategy’s Bitcoin holdings on its balance sheet by $17.9 billion to nearly $24 billion at the start of the new year. The company will adopt fair-value accounting for its crypto holdings, providing a more accurate reflection of its assets.
Share Price Volatility
MicroStrategy’s stock price has been volatile, closing at $330.66 on Friday, well below its record high of $473.83 in November. The company’s share price often follows the fluctuations of Bitcoin, making it a levered play on the cryptocurrency.
Shareholder Concerns
Retail investors have expressed concerns about share dilution and the potential impact on the company’s stock price. MicroStrategy’s plan to increase the number of authorized shares of Class A common stock has sparked debate among investors, with some viewing it as dilutive and others seeing it as necessary to continue buying Bitcoin.
Vote on Share Increase
A vote on the share increase proposal is set to take place on January 21, with Saylor’s significant stake in the company expected to secure its passage. If approved, the increased shares could lead to even greater volatility in MicroStrategy’s stock price.
Analyst Insights
Benchmark analyst Mark Palmer believes the recent share price drop is an overreaction, citing MicroStrategy’s strategy of issuing shares to make accretive Bitcoin purchases that benefit shareholders. Palmer remains bullish on the stock, with a “buy” rating.
MicroStrategy’s Aggressive Approach
MicroStrategy’s aggressive approach to buying Bitcoin has been opportunistic, rather than programmatic, according to Palmer. The company’s ability to raise capital and make significant purchases has positioned it as a leader in the crypto space.
Leave a Reply