In simpler terms, MicroStrategy, a well-known business software firm, has made headlines yet again after investing $101 million in Bitcoin (BTC).
Under the guidance of its chairman and co-founder, Michael Saylor, the firm intends to employ a mix of perpetual preferred stocks, ordinary shares, and debt to continue powering its Bitcoin acquisition plan.
MicroStrategy Eyes $42 Billion Capital Raise By 2027
According to a report submitted to the U.S. Securities and Exchange Commission (SEC), MicroStrategy revealed that they bought 1,070 Bitcoin tokens at around $94,000 per token on both December 30th and 31st, 2020.
In my role as a researcher, I’m excited to report that our latest acquisition has brought the company’s total Bitcoin holdings up to a staggering 447,470 BTC. This significant increase was achieved at an approximate cost of $27.97 billion, with each Bitcoin purchased at an average price of around $62,503.
Significantly, Saylor emphasized in a social media update (previously Twitter) that the company managed to secure a Bitcoin return of approximately 48% during the last quarter of 2024, and an impressive 74.3% for the full financial year.
Beyond just purchasing Bitcoin, MicroStrategy also has grander aspirations. Last Friday, they declared their aim to gather as much as $2 billion via the issuance of perpetual preferred stocks. These shares will rank higher than their Class A common stocks in priority.
This action is a piece of a broader plan to secure approximately $42 billion in funds by 2027 through methods such as selling stocks on demand and issuing convertible debt. With over two-thirds of its equity objectives already achieved, the company is likely to shift focus towards fixed-income markets soon.
There’s been a significant rise in interest for MicroStrategy’s stock (MSTR) among hedge funds, as they implement a strategy called convertible arbitrage. This strategy works by buying bonds and simultaneously selling the same company’s shares short.
This approach takes advantage of the unpredictability inherent in MicroStrategy’s shares, a trait that now forms a key component of their business structure. According to analyst Mark Palmer at Benchmark, he noted this characteristic.
MicroStrategy’s strategy often involves embracing volatility, as this flexibility empowers the company to access capital markets, especially the convertible bond market, with greater ease.
MicroStrategy’s latest plan to boost the permitted quantity of Class A common stock shares from 330 million to a staggering 10.3 billion has ignited concerns about potential share dilution, causing a substantial decline in the company’s stock value.
MicroStrategy’s Bold Bitcoin Strategy Faces Headwinds
On the date of the proxy submission in December, stocks experienced a dip as significant as 9.6%. Adam Kobeissi, creator of The Kobeissi Letter, highlighted the predicament that investors were encountering, expressing his viewpoint on the matter.
On one side, some individuals argue that the proposal is dilutive and are choosing to sell their stocks. However, on the opposite end, if the proposal fails, these same people won’t be able to continue investing in Bitcoin, effectively breaking their investment strategy.
On January 21, 2025, a vote for an increase in shares is planned, and since Saylor holds a substantial portion of the shares, it’s likely that this amendment will be accepted. If it goes through, an uptick in shares might cause increased volatility in MicroStrategy’s stock value, as the company would then carry more debt.
As a crypto investor, I’ve seen this digital asset company perform exceptionally well relative to Bitcoin in the past. However, over the last few months, it’s encountered some hurdles, reminding me that its success isn’t solely dependent on the fluctuations of cryptocurrency markets. Instead, various factors play a role in shaping its performance.
Regardless of the current ups and downs, Palmer continues to advocate for buying MicroStrategy’s shares. He thinks the market’s response to the suggested share growth might have been excessive.
He remarked that the company’s approach involves buying Bitcoins by issuing shares, a move that could potentially increase the value for shareholders.
In late 2024, MicroStrategy made substantial Bitcoin buys amounting to over $1 billion, demonstrating its proactive strategy towards Bitcoin acquisition. However, the past few weeks have witnessed a decrease in these purchases due to the volatile nature of Bitcoin prices.
Palmer assured the investors, explaining, “Our business strategy has been accelerated, which doesn’t mean we’re experiencing a decline… rather, it showcases the proactive nature of our company.
Currently, the most prominent cryptocurrency is nearing the significant figure of $100,000, as it stands at $99,340 – a 2% increase over the past day.
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2025-01-07 06:05