MicroStrategy Announces Conditional Full Redemption of 6.125% Senior Secured Notes due 2028

Rhea-AI Summary

MicroStrategy (Nasdaq: MSTR) has announced a conditional full redemption of its 6.125% Senior Secured Notes due 2028. The company plans to redeem the entire $500 million outstanding principal amount on September 26, 2024, at a redemption price of 103.063% of the principal amount, plus accrued and unpaid interest. The redemption is contingent upon MicroStrategy issuing $600 million or more in senior convertible notes before the redemption date. If successful, this redemption will release collateral securing the Notes, including approximately 69,080 bitcoins. The move suggests a strategic shift in MicroStrategy's debt structure and potentially its bitcoin holdings.

Positive

• Potential reduction of $500 million in outstanding debt
• Release of 69,080 bitcoins currently used as collateral
• Possible improvement in debt structure through issuance of convertible notes

Negative

• Redemption price of 103.063% plus interest increases the cost of debt repayment
• Conditional nature of the redemption introduces uncertainty
• Potential dilution for shareholders if new convertible notes are issued

Insights

Financial Analyst

MicroStrategy's announcement to redeem its $500 million 6.125% Senior Secured Notes is a significant financial move. The company plans to replace this debt with $600 million or more in senior convertible notes, potentially improving its capital structure. The redemption price of 103.063% plus accrued interest indicates a premium over face value, which is typical for early redemptions. Notably, the release of 69,080 bitcoins as collateral could provide MicroStrategy with more flexibility in managing its bitcoin holdings. This refinancing strategy could lower interest costs and extend debt maturities, potentially strengthening the company's financial position. However, the success of this move hinges on market conditions and investor appetite for the new convertible notes.

Cryptocurrency Expert

The potential release of 69,080 bitcoins from collateral is a significant development in MicroStrategy's bitcoin strategy. At current prices, this represents over $2 billion in value. Freeing up this substantial bitcoin holding could give MicroStrategy more options in its cryptocurrency operations, potentially allowing for more aggressive accumulation or strategic sales. This move aligns with the company's long-term bitcoin-focused strategy, potentially providing greater flexibility in managing its digital asset portfolio. However, it's important to note that this doesn't necessarily indicate an immediate plan to sell these bitcoins. Instead, it might represent a shift towards a more dynamic approach to MicroStrategy's bitcoin treasury management.

Corporate Finance Expert

MicroStrategy's debt restructuring plan is a strategic financial maneuver. By replacing secured notes with convertible notes, the company is potentially reducing its interest burden and extending its debt maturity profile. The move from secured to convertible debt could also indicate management's confidence in the company's stock performance. However, this strategy comes with its own set of risks. The success of the new note issuance is crucial, as failure to meet the $600 million threshold could derail the redemption plan. Additionally, while convertible notes often carry lower interest rates, they can lead to dilution for existing shareholders if converted. Investors should closely monitor the terms of the new convertible notes and their potential impact on the company's capital structure and shareholder value.

TYSONS CORNER, Va.--(BUSINESS WIRE)-- MicroStrategy® Incorporated (Nasdaq: MSTR) (“MicroStrategy”) today announced that it delivered a notice, dated September 16, 2024, of conditional full redemption (the “Notice”) to the trustee of MicroStrategy’s outstanding 6.125% Senior Secured Notes due 2028 (CUSIP Nos. 594972 AF8 (144A), U59363 AA6 (Reg S) (the “Notes”). The aggregate principal amount of the Notes being redeemed is $500.0 million, which is equal to the current aggregate principal amount of the Notes outstanding. The Notice calls for the redemption of all of the outstanding Notes (the “Redemption”) on September 26, 2024 (the “Redemption Date”) if the Closing Condition (defined below) has been satisfied or waived by MicroStrategy as of the Redemption Date, at a redemption price equal to 103.063% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to but excluding the Redemption Date relating to the Notes (the “Redemption Price”).

MicroStrategy’s obligation to redeem any of the Notes and to pay the Redemption Price on the Redemption Date is conditioned upon the issuance and settlement, through one or more closings, by MicroStrategy of senior convertible notes in an aggregate principal amount of $600 million or more on or prior to 9:00 a.m. (ET) on the Redemption Date (the “Closing Condition”). If the Closing Condition is not satisfied or waived on or prior to 9:00 a.m. (ET) on the Redemption Date, MicroStrategy may, in its discretion: (i) delay the Redemption Date until the date the Closing Condition is satisfied; or (ii) rescind the Notice if the Closing Condition is not satisfied by the Redemption Date, or by the Redemption Date so delayed.

On the Redemption Date, assuming the Closing Condition is satisfied or waived, the applicable Redemption Price will become due and payable in respect of the Notes and interest on the Notes will cease to accrue on and after the Redemption Date to the extent that MicroStrategy does not default in the payment of the applicable Redemption Price.

Upon Redemption of the Notes, all collateral securing the Notes, including approximately 69,080 bitcoins, will be released.

To collect the applicable Redemption Price, a holder must comply with the procedures set forth in the indenture governing the Notes, including: (i) in the case of Notes held through The Depository Trust Company (“DTC”), in accordance with DTC’s applicable procedures and (ii) in the case of physically held Notes, at the address of the paying agent specified in the Notice.

This press release shall not constitute a notice of redemption of the Notes. Information concerning the terms and conditions of the Redemption is described in the notice distributed to holders of the Notes by the trustee under the indenture governing the Notes. This press release shall not constitute an offer to buy or a solicitation of an offer to sell any Notes and shall not constitute an offer, solicitation, or sale in any jurisdiction in which such offering, solicitation or sale would be unlawful.

About MicroStrategy Incorporated MicroStrategy

MicroStrategy (Nasdaq: MSTR) considers itself the world’s first Bitcoin development company. We are a publicly-traded operating company committed to the continued development of the bitcoin network through our activities in the financial markets, advocacy and technology innovation. As an operating business, we are able to use cashflows as well as proceeds from equity and debt financings to accumulate bitcoin, which serves as our primary treasury reserve asset. We also develop and provide industry-leading AI-powered enterprise analytics software that promotes our vision of Intelligence Everywhere, and are using our software development capabilities to develop bitcoin applications. We believe that the combination of our operating structure, bitcoin strategy and focus on technology innovation provides a unique opportunity for value creation.

MicroStrategy and Intelligence Everywhere are either trademarks or registered trademarks of MicroStrategy Incorporated in the United States and certain other countries.

Forward-Looking Statements

Statements in this press release about future expectations, plans, and prospects, as well as any other statements regarding matters that are not historical facts, may constitute “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements relating to satisfaction of the Closing Condition or the outcome of the Redemption. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including: the uncertainties related to market conditions, the completion of the Redemption and other factors discussed in the “Risk Factors” section of MicroStrategy’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 6, 2024, and the risks described in other filings that MicroStrategy may make with the Securities and Exchange Commission. Any forward-looking statements contained in this press release speak only as of the date hereof, and MicroStrategy specifically disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240916980998/en/

MicroStrategy Incorporated

Shirish Jajodia

Investor Relations

ir@microstrategy.com

Source: MicroStrategy Incorporated

FAQ

What is the redemption price for MicroStrategy's 6.125% Senior Secured Notes due 2028?

MicroStrategy (MSTR) plans to redeem the Notes at 103.063% of the principal amount, plus accrued and unpaid interest up to the Redemption Date of September 26, 2024.

How many bitcoins will be released as collateral if MicroStrategy (MSTR) redeems its Senior Secured Notes?

Approximately 69,080 bitcoins will be released as collateral upon the redemption of MicroStrategy's 6.125% Senior Secured Notes due 2028.

What is the condition for MicroStrategy (MSTR) to proceed with the redemption of its Senior Secured Notes?

MicroStrategy's redemption is conditional upon the company issuing and settling senior convertible notes with an aggregate principal amount of $600 million or more by 9:00 a.m. (ET) on September 26, 2024.

When is the planned redemption date for MicroStrategy's (MSTR) 6.125% Senior Secured Notes?

MicroStrategy has set September 26, 2024, as the Redemption Date for its 6.125% Senior Secured Notes due 2028, subject to meeting the specified conditions.