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

Rhea-AI Summary

MicroStrategy intends to offer $500 million aggregate principal amount of convertible senior notes due 2031 in a private offering to qualified institutional buyers. The notes will bear interest and mature on March 15, 2031. The company plans to use the proceeds to acquire additional bitcoin and for general corporate purposes.

Insights

Financial Analyst

The announcement by MicroStrategy to offer $500 million in convertible senior notes is a significant financial move, indicative of the company's strategic efforts to raise capital. The use of convertible notes is a dual-edged strategy. On one hand, it provides the company with immediate capital infusion without diluting current shareholders' equity, assuming the notes remain unconverted. On the other hand, it could lead to future dilution if the notes are converted into equity. The potential additional offering of $75 million suggests a buffer for higher than anticipated demand, which can be interpreted as a positive signal to the market regarding investor confidence.

Investors and analysts should closely monitor the interest rate and conversion rate terms upon pricing, as these will affect the attractiveness of the notes and the potential impact on the company's stock. The intended use of proceeds to acquire additional bitcoin is a reaffirmation of MicroStrategy's ongoing investment strategy in cryptocurrency, which introduces a layer of risk given bitcoin's volatility. This could have a significant impact on the company's balance sheet and future financial stability.

Market Research Analyst

MicroStrategy's decision to raise funds through convertible notes is also reflective of the broader market's appetite for such financial instruments. It leverages the current low interest rate environment, which makes debt financing an attractive option for corporations. However, the reliance on qualified institutional buyers indicates a targeted fundraising approach, limiting the pool of potential investors but possibly ensuring a more stable investment base.

Furthermore, the stipulation that the notes are unsecured and senior obligations is crucial. It means that in the event of a default, note holders would be prioritized over other debt, but without collateral backing the notes, the risk is inherently higher. This could affect the pricing of the notes, as investors will demand a higher yield for the increased risk. The redemption features provide flexibility to MicroStrategy, allowing it to manage potential dilution and financial obligations based on its operational needs and market conditions.

Cryptocurrency Expert

The earmarking of proceeds for bitcoin acquisition is a continuation of MicroStrategy's aggressive cryptocurrency strategy, positioning the company as a de facto investment vehicle for bitcoin. This move will likely resonate with investors who are bullish on cryptocurrencies but prefer exposure through a publicly traded company. However, it's essential to recognize the inherent risks associated with such a strategy, as the volatility of bitcoin can significantly influence the company's asset value and investor sentiment.

Given the recent fluctuations in the cryptocurrency market, MicroStrategy’s strategy could be seen as a high-risk maneuver that further entrenches the company’s performance with the whims of the cryptocurrency market. The long-term implications of such an investment focus warrant careful consideration, as it could either greatly enhance the company's value or expose it to substantial financial risk.

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 2031 (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 March 15 and September 15 of each year, beginning on September 15, 2024. The notes will mature on March 15, 2031, unless earlier repurchased, redeemed or converted in accordance with their terms. Subject to certain conditions, on or after March 22, 2028, 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 September 15, 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 September 15, 2030, 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 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 15, 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/20240313484286/en/

MicroStrategy Incorporated

Shirish Jajodia

Investor Relations

ir@microstrategy.com

Source: MicroStrategy

FAQ

What is MicroStrategy's plan regarding the offering of convertible senior notes due 2031?

MicroStrategy intends to offer $500 million aggregate principal amount of convertible senior notes due 2031 in a private offering to qualified institutional buyers.

When will the notes mature?

The notes will mature on March 15, 2031.

How does MicroStrategy plan to utilize the proceeds from the sale of the notes?

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

What type of buyers are the notes being offered to?

The notes will be offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

Are the notes registered under the Securities Act?

The notes have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction.