MicroStrategy Announces Proposed Private Offering of $500 Million of Convertible Senior Notes

Rhea-AI Summary

MicroStrategy announced a proposed private offering of $500 million in convertible senior notes due 2032, targeting qualified institutional buyers under Rule 144A of the Securities Act. An additional $75 million option may be granted to initial purchasers. The notes, bearing semi-annual interest, will be unsecured senior obligations and convertible into cash, MicroStrategy class A common stock, or a combination thereof. Proceeds will be used to buy more bitcoin and for general corporate purposes. The offering's completion is subject to market conditions.

Positive

• MicroStrategy aims to raise $500 million through convertible senior notes.
• An option for an additional $75 million is available, enhancing potential capital.
• Proceeds will be used to acquire more bitcoin and for corporate purposes, potentially increasing asset value.
• The notes are convertible into cash or class A common stock, providing flexibility for investors.

Negative

• The offering is subject to market conditions, with no assurance of completion.
• Notes will be unsecured, posing a higher risk to investors.
• The potential dilution of shares could affect existing shareholders negatively.
• Dependence on bitcoin acquisition may increase financial volatility.

Insights

Financial Analyst

MicroStrategy's proposed private offering of $500 million in convertible senior notes signifies a strategic move to raise capital. Convertible notes can be attractive to investors as they provide regular interest payments with the added option to convert into company stock. These notes are due in 2032 and will bear interest payable semi-annually, with specific conversion conditions and redemption options. The offering is aimed at qualified institutional buyers under Rule 144A, reflecting MicroStrategy's intent to target sophisticated investors.

From a financial perspective, the proceeds will be used to acquire additional bitcoin and for general corporate purposes. This strategy aligns with MicroStrategy's ongoing investment in Bitcoin, potentially enhancing its portfolio value if Bitcoin prices rise. However, this also introduces considerable risk due to Bitcoin's volatility. Investors should weigh the benefits of potential Bitcoin gains against the risks of market fluctuation.

Moreover, the interest rate and initial conversion price will be determined at the time of pricing, which can impact the attractiveness of the offering. Monitoring market conditions and investor sentiment will be important as these factors can influence the success of the offering.

Overall, for retail investors, it's essential to understand the dual nature of convertible notes - providing both debt security and potential equity upside, albeit with associated risks.

Market Research Analyst

MicroStrategy's decision to use proceeds for acquiring bitcoin and general corporate purposes is a bold step. By leveraging convertible senior notes, the company can raise substantial funds without immediate dilution of its equity. This move may appeal to investors bullish on both MicroStrategy’s business model and Bitcoin.

The private offering structure under Rule 144A allows MicroStrategy to target institutional investors, likely aiming for those who understand the complexities and risks associated with convertible notes and cryptocurrency investments. For retail investors, this indicates institutional confidence which can be a positive signal.

However, the dual purpose use of proceeds - investing in Bitcoin and corporate needs - might create mixed reactions. While some may view this as a strong strategic direction, others may see it as risky and highly speculative. It's important to consider the broader market sentiment towards Bitcoin and the potential volatility this introduces to MicroStrategy's financial health.

In the long-term, success hinges on Bitcoin’s performance and MicroStrategy's ability to manage and integrate these investments effectively. This move underscores the importance of understanding cryptocurrency market dynamics and their impact on traditional financial strategies.

TYSONS CORNER, Va.--(BUSINESS WIRE)-- MicroStrategy^® Incorporated (Nasdaq: MSTR) (“MicroStrategy”) today announced that it intends to offer, subject to market conditions and other factors, $500 million aggregate principal amount of convertible senior notes due 2032 (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”). MicroStrategy also expects to grant to the initial purchasers of the notes an option to purchase, within a 13-day period beginning on, and including, the date on which the notes are first issued, up to an additional $75 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 and will bear interest payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2024. The notes will mature on June 15, 2032, unless earlier repurchased, redeemed or converted in accordance with their terms. Subject to certain conditions, on or after June 20, 2029, 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 15, 2029. 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 December 15, 2031, 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 interest rate, 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 9:30 AM through 4:00 PM EDT on the date of pricing.

MicroStrategy intends to use the net proceeds from the sale of the notes 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 pursuant to Rule 144A 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.

About MicroStrategy Incorporated

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.

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 May 1, 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/20240613721461/en/

MicroStrategy Incorporated

Shirish Jajodia

Investor Relations

ir@microstrategy.com

Source: MicroStrategy Incorporated

FAQ

What is the value of MicroStrategy's proposed convertible senior notes offering?

MicroStrategy plans to offer $500 million in convertible senior notes, with an option for an additional $75 million.

When are the MicroStrategy convertible senior notes due?

The notes are due on June 15, 2032.

What will the proceeds from MicroStrategy's notes offering be used for?

Proceeds are intended to acquire more bitcoin and for general corporate purposes.

Can the MicroStrategy notes be converted into stock?

Yes, the notes can be converted into cash, class A common stock, or both, at MicroStrategy's election.

What are the risks associated with MicroStrategy's notes offering?

Risks include market condition dependencies, unsecured nature of the notes, potential share dilution, and financial volatility from bitcoin investments.