MicroStrategy Announces Proposed Private Offering of $1.75 Billion of Convertible Senior Notes

Rhea-AI Summary

MicroStrategy (MSTR) announces plans to offer $1.75 billion of 0% convertible senior notes due 2029 in a private offering to qualified institutional buyers. The company may grant initial purchasers an option for an additional $250 million. The notes will be convertible into cash, MSTR class A common stock, or a combination of both. The proceeds will be used to acquire additional bitcoin and for general corporate purposes. The notes will mature on December 1, 2029, with potential early repurchase, redemption, or conversion options. MicroStrategy may redeem the notes after December 4, 2026, while holders can require repurchase on June 1, 2028.

Positive

• Zero interest rate on the convertible notes, reducing debt service costs
• Potential to raise up to $2 billion in capital ($1.75B + $250M option)
• Flexible conversion terms allowing payment in cash, stock, or combination

Negative

• Additional debt burden of up to $2 billion on company's balance sheet
• Potential future dilution of existing shareholders if notes are converted to stock
• Significant bitcoin acquisition strategy carries high market risk

Insights

Financial Analyst

This $1.75 billion convertible note offering marks a significant financial move by MicroStrategy, potentially expanding their bitcoin holdings. The 0% interest rate and 2029 maturity structure is notably favorable in the current market environment. The conversion feature, allowing holders to convert notes into cash or stock, provides flexibility while potentially limiting immediate dilution.

Key aspects include the additional $250 million option for purchasers and the redemption clause after December 2026. The strategic timing aligns with MicroStrategy's bitcoin accumulation strategy, though it increases their debt exposure. The conversion price mechanism, based on volume-weighted average pricing, suggests careful consideration of market dynamics and shareholder interests.

The offering's structure as a private placement to qualified institutional buyers indicates strong institutional interest and potentially faster execution compared to public offerings.

Market Research Analyst

This offering represents a strategic move in MicroStrategy's bitcoin acquisition strategy. The zero-coupon structure minimizes immediate cash outflow while providing significant capital for bitcoin purchases. The timing coincides with recent bitcoin price movements and market sentiment shifts.

The conversion features and redemption options provide safeguards for both the company and investors. The $75 million minimum outstanding requirement for partial redemption ensures market liquidity. The 2028 repurchase right gives noteholders important protection while maintaining MicroStrategy's operational flexibility.

TYSONS CORNER, Va.--(BUSINESS WIRE)-- MicroStrategy® Incorporated (Nasdaq: MSTR) (“MicroStrategy”) today announced that it intends to offer, subject to market conditions and other factors, $1.75 billion aggregate principal amount of its 0% convertible senior notes due 2029 (the “notes”) in a private offering to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) and to certain non-U.S. persons in transactions outside the United States in compliance with Regulation S under the Securities Act. MicroStrategy also expects to grant to the initial purchasers of the notes an option to purchase, within a 3-day period beginning on, and including, the date on which the notes are first issued, up to an additional $250 million aggregate principal amount of the notes. The offering is subject to market and other conditions, and there can be no assurance as to whether, when or on what terms the offering may be completed.

The notes will be unsecured, senior obligations of MicroStrategy. The notes will not bear regular interest, and the principal amount of the notes will not accrete. The notes will mature on December 1, 2029, unless earlier repurchased, redeemed or converted in accordance with their terms. Subject to certain conditions, on or after December 4, 2026, MicroStrategy may redeem for cash all or any portion of the notes. If MicroStrategy redeems fewer than all the outstanding notes, at least $75 million aggregate principal amount of notes must be outstanding and not subject to redemption as of the relevant redemption notice date. Holders of the notes will have the right to require MicroStrategy to repurchase for cash all or any portion of their notes on June 1, 2028. The notes will be convertible into cash, shares of MicroStrategy’s class A common stock, or a combination of cash and shares of MicroStrategy’s class A common stock, at MicroStrategy’s election. Prior to June 1, 2029, the notes will be convertible only upon the occurrence of certain events and during certain periods, and thereafter, at any time until the second scheduled trading day immediately preceding the maturity date. The initial conversion rate and other terms of the notes will be determined at the time of pricing of the offering. MicroStrategy expects that the reference price used to calculate the initial conversion price for the notes will be the U.S. composite volume weighted average price of MicroStrategy’s class A common stock from 1:30 p.m. through 4:00 p.m. Eastern Standard Time on the date of pricing.

MicroStrategy intends to use the net proceeds from this offering to acquire additional bitcoin and for general corporate purposes.

The notes will be offered and sold to persons reasonably believed to be qualified institutional buyers in accordance with Rule 144A under the Securities Act and to certain non-U.S. persons in transactions outside the United States in compliance with Regulation S under the Securities Act. The offer and sale of the notes and the shares of MicroStrategy’s class A common stock issuable upon conversion of the notes, if any, have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction, and the notes and any such shares may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements. Any offer of the notes will be made only by means of a private offering memorandum.

This press release shall not constitute an offer to sell, or a solicitation of an offer to buy the notes, nor shall there be any sale of, the notes in any state or jurisdiction in which such offer, solicitation or sale would be unlawful under the securities laws of any such state or jurisdiction. There can be no assurances that the offering of the notes will be completed as described herein or at all.

Video Webinar

MicroStrategy will be discussing the proposed convertible notes offering on a live Video Webinar beginning at approximately 9:00 a.m. Eastern Standard Time on Tuesday, November 19, 2024. If you are a qualified institutional buyer as defined in Rule 144A under the Securities Act, and you would like to participate in this proposed convertible notes offering and/or attend the Video Webinar, please complete the investor survey, which can be accessed at https://www.microstrategy.com/investor-relations/register. We or parties on our behalf may request additional information to verify your status as a qualified institutional buyer. Failure to provide requested information may prevent you from participating in our private offering of securities pursuant to Rule 144A under the Securities Act. Access to the Video Webinar and completion of the investor survey does not mean you will receive an allocation in this proposed convertible notes offering.

About MicroStrategy Incorporated

MicroStrategy (Nasdaq: MSTR) is the world's first and largest Bitcoin Treasury Company. We are a publicly traded company that has adopted Bitcoin as our primary treasury reserve asset. By using proceeds from equity and debt financings, as well as cash flows from our operations, we strategically accumulate Bitcoin and advocate for its role as digital capital. Our treasury strategy is designed to provide investors varying degrees of economic exposure to Bitcoin by offering a range of securities, including equity and fixed-income instruments. In addition, we provide industry-leading AI-powered enterprise analytics software, advancing our vision of Intelligence Everywhere. We leverage our development capabilities to explore innovation in Bitcoin applications, integrating analytics expertise with our commitment to digital asset growth. We believe our combination of operational excellence, strategic Bitcoin reserve, and focus on technological innovation positions us as a leader in both the digital asset and enterprise analytics sectors, offering a unique opportunity for long-term value creation.

MicroStrategy, MicroStrategy AI, Intelligence Everywhere, Intelligent Enterprise, and MicroStrategy Library are either trademarks or registered trademarks of MicroStrategy Incorporated in the United States and certain other countries. Other product and company names mentioned herein may be the trademarks of their respective owners.

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 the size and timing of the offering, the anticipated use of any proceeds from the offering, and the terms of the notes. 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 and the completion of the offering on the anticipated terms or at all, the 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 October 31, 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/20241118315372/en/

MicroStrategy Incorporated

Shirish Jajodia

Corporate Treasurer

ir@microstrategy.com

Source: MicroStrategy Incorporated

FAQ

What is the size of MicroStrategy's (MSTR) new convertible note offering?

MicroStrategy (MSTR) is offering $1.75 billion in convertible senior notes, with an additional option for purchasers to buy up to $250 million more, potentially totaling $2 billion.

When will MicroStrategy's (MSTR) 2029 convertible notes mature?

The convertible notes will mature on December 1, 2029, unless earlier repurchased, redeemed, or converted according to their terms.

What is the interest rate on MicroStrategy's (MSTR) new convertible notes?

The convertible notes will bear 0% regular interest, and the principal amount will not accrete.

How will MicroStrategy (MSTR) use the proceeds from the convertible note offering?

MicroStrategy plans to use the net proceeds to acquire additional bitcoin and for general corporate purposes.