MicroStrategy, known as the largest corporate holder of bitcoin (btc), has once again expanded its holdings. As bitcoin-news/microstrategy-boosts-bitcoin-holdings-with-590-million-purchase-totaling-174530-btc/” target=”_blank” rel=”noopener nofollow”>revealed Yesterday, the company purchased approximately 16,130 btc in November (worth approximately $608 million at current market rates). The acquisitions were executed at an average price of approximately $36,785 per bitcoin, bringing MicroStrategy's total holdings to 174,530 btc.
The software company, led by Michael Saylor, also revealed plans to potentially raise $750 million through an offering of Class A common stock. Partners in this venture include Cowen and Company, Canaccord Genuity and BTIG. However, this announcement has sparked speculation on several social media platforms, suggesting that MicroStrategy could be dealing with a “debt problem.”
Does MicroStrategy have a “debt problem”?
Patrick Flood, Chartered Financial Analyst (CFA) and investment expert at LATAM stocks, has deepened on these rumors to dispel the growing fear, uncertainty and doubt (FUD) surrounding MicroStrategy's debt situation. In his detailed analysis published in X, Flood provided information on the company's financial situation and future prospects.
Flood says: “I see a lot of FUD on MicroStrategy debt. People are worried that Michael Saylor will continue buying bitcoin instead of dealing with his “debt problem.” I suspect these people haven't read MSTR's financials… I have. And I don't think they have any debt problems.”
Furthermore, he explained that MicroStrategy's immediate financial obligations are not pressing, as the company is not obligated to repay anything until December 15, 2025. This gives MicroStrategy enough time to roll over the debt or issue shares for payment. However, Flood suggests that repaying the 2025 note may be unnecessary.
In explaining the mechanics of the 2025 and 2027 convertible notes, Flood highlights the conditions under which debtholders can elect to convert. If MicroStrategy shares trade at 130% or more of the 2025 conversion price for 20 of the 30 trading days, the conversion becomes a viable and attractive option for debt holders, primarily due to the possibility of selling the shares with a 30% premium on the conversion. price. This premium far exceeds the 0.75% annual interest rate on the debt, making the conversion a financially sound decision.
Flood estimates the critical price for this conversion to be $517.39, based on a conversion price of $397.99 and a premium of 130%. With the current share price hovering around $498 and a 30-day moving average of $461, he suggests that reaching the necessary conversion threshold looks increasingly likely.
“The implications of the 2025 banknote conversion are significant,” says Flood. “First, MicroStrategy's next debt payment would be delayed until February 15, 2027, three years from now. Second, it would mean that the next $750 million Saylor plans to raise could be invested directly into bitcoin, potentially before bitcoin halving in around April 2024.”
bitcoin community reactions
The bitcoin community has been vocal in its responses to MicroStrategy's latest strategic maneuver. They have generally applauded Saylor. Erik Voorhees, CEO of ShapeShift, fixed, “Within a couple of years, MicroStrategy will have more bitcoin than most sovereign nations can afford. What a mess!
Preston Pysh, another well-known voice in the bitcoin community, commented“Wake up people! Michael Saylor is hosting a clinic for Wall Street dinosaurs.” Dylan LeClair also weighed in on the discussion and praised Michael Saylor's playbook and MicroStrategy.
*MICROSTRATEGY ACQUIRED 16,130 BITCOINS FOR ~$593.3M IN CASH
* MICROSTRATEGIA PRESENTS AN OFFER OF SHARES IN ATMS OF UP TO $750 MILLION
*MICROSTRATEGY NOW HAS 174,530 btc ACQUIRED FOR $5.28 BILLION AT AN AVERAGE PRICE OF $30,252 PER bitcoin
a corporate manual for the new buyback pic.twitter.com/Q37qMU30HQ
—Dylan LeClair (@DylanLeClair_) November 30, 2023
At the time of publication, btc was trading at $38,343.
Featured image from iStock, chart from TradingView.com
