MicroStrategy Holds $8.6 Billion Bitcoin with Today’s New Purchase
MicroStrategy, the American business intelligence firm, has again made headlines with its aggressive investment in Bitcoin. On June 20, 2024, the company completed an $800 million convertible note offering, underscoring its relentless commitment to Bitcoin acquisition.
MicroStrategy Completes $800 Million Offering of Convertible Notes at 2.25% Coupon and 35% Conversion Premium $MSTRhttps://t.co/qJ6awPbKjO
MicroStrategy’s recent offering of 2.25% convertible senior notes due 2032 raised an impressive $800 million, including an additional $100 million from the initial purchasers exercising their option to buy more notes. After accounting for discounts and commissions, the net proceeds from this sale were approximately $786 million. As outlined in the official announcement, these funds were primarily earmarked for acquiring additional Bitcoin, with the remainder allocated for general corporate purposes.
Acquisition of 11,931 BTC
The proceeds from the note offering facilitated the purchase of 11,931 BTC, acquired at an average price of $65,883 per Bitcoin. This substantial acquisition, valued at $786 million, increased MicroStrategy’s total Bitcoin holdings to 226,331 BTC. Michael Saylor, the founder and chairman of MicroStrategy, highlighted the company’s ongoing strategy: “As of June 20, 2024, MicroStrategy holds 226,331 BTC acquired for approximately $8.33 billion at an average price of $36,798 per Bitcoin.”
MicroStrategy has acquired an additional 11,931 BTC for ~$786.0M using proceeds from convertible notes & excess cash for ~$65,883 per #bitcoin. As of 6/20/24, $MSTR hodls 226,331 $BTC acquired for ~$8.33B at average price of $36,798 per bitcoin.https://t.co/jE9dGqqnON
This latest purchase reinforces MicroStrategy’s position as the largest public holder of Bitcoin, with its holdings representing about 1% of the total Bitcoin supply. The company’s strategic focus on Bitcoin began in August 2020, when it first bought $250 million worth of BTC, establishing Bitcoin as its primary reserve currency. Since then, MicroStrategy has bought Bitcoin in significant batches, regularly leveraging convertible note offerings to finance these acquisitions.
Financial Implications and Market Reactions
Despite its aggressive Bitcoin purchasing strategy, MicroStrategy has faced substantial financial challenges. The company reported a net loss of $53.1 million in the first quarter 2024. This loss is notable given the broader economic context: Bitcoin has surged by approximately 700% since early 2020. However, the company has yet to adopt the new digital asset fair value accounting standard, which would consider BTC price movements in market valuation. This accounting change could potentially mitigate some of the reported losses by reflecting the actual market value of the held Bitcoin.
MicroStrategy’s shares have shown remarkable resilience and growth. Since the firm’s initial Bitcoin purchases began four years ago, its shares have risen roughly tenfold. This stock performance has attracted attention and investment from the market, as evidenced by Bernstein’s recent coverage of MicroStrategy with an outperform rating and a price target of $2,890.
Broader Impact on Corporate Bitcoin Adoption
MicroStrategy’s strategy has influenced other companies to consider Bitcoin a reserve asset. For instance, Semler Scientific, another U.S.-listed company, has followed a similar path by adding Bitcoin to its treasury. Semler’s shares have increased significantly by over 60% since the company disclosed its Bitcoin purchases in late May.
MicroStrategy’s approach aims to spearhead a broader movement for corporate treasuries to adopt Bitcoin. While risky, this strategy positions the company at the forefront of a potential shift in managing corporate reserves. The decision to continuously tap into capital markets to fund Bitcoin purchases is both innovative and controversial, reflecting a strong belief in the long-term value of Bitcoin.
Conclusion
MicroStrategy’s latest $800 million convertible note offering and subsequent Bitcoin purchase of 11,931 BTC is a bold testament to its unwavering faith in Bitcoin. Despite facing significant financial losses, the company remains steadfast in its strategy, driven by the belief that Bitcoin will continue to appreciate. This aggressive acquisition strategy solidifies MicroStrategy’s position as the largest public Bitcoin holder and sets a precedent for other companies considering Bitcoin as a reserve asset. As the market continues to evolve, MicroStrategy’s bold moves will undoubtedly be scrutinised and could pave the way for a new era in corporate treasury management.
