MicroStrategy Announces Proposed Private Offering of $600 Million of Convertible Senior Notes

Rhea-AI Summary

MicroStrategy (MSTR) plans to offer $600 million in convertible senior notes due 2030 to qualified institutional buyers. The notes will bear interest semi-annually and mature in 2030. MicroStrategy may redeem the notes after March 22, 2027. Holders can request repurchase in 2028. The notes will be convertible into cash or MicroStrategy's class A common stock. The net proceeds will be used to acquire more bitcoin and for general corporate purposes.

Insights

Financial Analyst

The announcement by MicroStrategy to issue $600 million in convertible senior notes with an additional option for purchasers to buy up to $90 million more is a strategic financial move. Convertible notes are a form of debt that can be converted into equity, typically at the discretion of the bondholder. This offering can be beneficial for the company as it may lower the immediate cash interest payments compared to traditional debt, given that investors are partially compensated through the optionality of conversion into equity.

However, the potential dilution of current shareholders' equity upon conversion is a critical consideration. Investors will need to weigh the company's use of proceeds, which includes the acquisition of more bitcoin, against the risk of dilution and the company's long-term strategy. Given the volatile nature of cryptocurrency markets, this allocation of funds could be seen as aggressive and speculative. The success of this financial strategy will largely depend on the future performance of bitcoin and the company's ability to manage its cryptocurrency portfolio effectively.

Market Research Analyst

MicroStrategy's decision to raise capital through convertible notes could indicate its confidence in the company's growth prospects and a bullish outlook on its stock price, as investors will only convert their notes into shares if they believe the share price will rise above the conversion price. It's also reflective of a broader trend where companies with high growth potential leverage innovative financing instruments to fund their operations without immediately diluting shareholder value.

The timing and conditions of the market will play a significant role in the success of the offering. A favorable interest rate and conversion terms will be crucial to attract qualified institutional buyers. The market's response to this offering will provide insights into investor sentiment regarding MicroStrategy's business model and its continued investment in bitcoin. The impact on the stock price will depend on the market's perception of the company's risk profile post-issuance.

Cryptocurrency Analyst

MicroStrategy's use of the net proceeds to acquire additional bitcoin is noteworthy, as it highlights the company's continued commitment to cryptocurrency as a core investment strategy. This move further entrenches MicroStrategy as a significant player in the cryptocurrency space and signals to the market its belief in the long-term value proposition of bitcoin. However, this strategy is not without risk, as it exposes the company to the high volatility inherent in cryptocurrency markets.

Investors will need to consider the implications of MicroStrategy's increased exposure to bitcoin. While some may view it as a forward-thinking approach to treasury management, others may see it as an amplification of risk. The company's balance sheet and stock price could experience significant fluctuations with the volatile price movements of bitcoin. This approach could potentially affect the company's creditworthiness and investor confidence in the long term, should the cryptocurrency market face downturns.

TYSONS CORNER, Va.--(BUSINESS WIRE)-- MicroStrategy^® Incorporated (Nasdaq: MSTR) (“MicroStrategy”) today announced that it intends to offer, subject to market conditions and other factors, $600 million aggregate principal amount of convertible senior notes due 2030 (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 $90 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, 2030, unless earlier repurchased, redeemed or converted in accordance with their terms. Subject to certain conditions, on or after March 22, 2027, MicroStrategy may redeem for cash all or any portion of the notes. If MicroStrategy redeems fewer than all the outstanding notes, at least $90 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, 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 interest rate, conversion rate, conversion price and certain other terms of the notes will be determined at the time of pricing of the offering.

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/20240304160008/en/

MicroStrategy Incorporated

Shirish Jajodia

Investor Relations

ir@microstrategy.com

Source: MicroStrategy Incorporated

FAQ

What is MicroStrategy's (MSTR) plan regarding the convertible senior notes?

MicroStrategy intends to offer $600 million in convertible senior notes due 2030 to qualified institutional buyers.

When will the notes mature?

The notes will mature on March 15, 2030, unless earlier repurchased, redeemed, or converted.

How can the notes be converted?

The notes will be convertible into cash, shares of MicroStrategy's class A common stock, or a combination of both.

What will MicroStrategy do with the net proceeds from the notes sale?

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

Who can purchase the notes?

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