MicroStrategy to Redeem $1.05B of 2027 Convertible Notes and Settle All Conversion Requests in Shares

Rhea-AI Summary

MicroStrategy (MSTR) has announced a full redemption notice for its outstanding 0.0% Convertible Senior Notes due 2027, with an aggregate principal amount of approximately $1.05 billion. The redemption is scheduled for February 24, 2025, at 100% of the principal amount plus any accrued special interest.

Prior to the redemption date, noteholders can convert their notes into MicroStrategy class A common stock at a conversion rate of 7.0234 shares per $1,000 principal amount, equivalent to a conversion price of $142.38 per share. The company has elected to satisfy all conversion obligations solely through shares of its class A common stock, with cash payments only for fractional shares.

Positive

• Company has sufficient equity value to settle $1.05B convertible notes through stock rather than cash
• Elimination of $1.05B debt liability from balance sheet through equity conversion
• No cash outlay required for debt settlement, preserving company liquidity

Negative

• Potential significant dilution to existing shareholders through issuance of new shares
• Conversion price of $142.38 is substantially below current market price

Insights

Financial Analyst

MicroStrategy's strategic move to redeem $1.05 billion in convertible notes marks a pivotal shift in their capital structure. The decision to settle all conversions with stock rather than cash demonstrates sophisticated financial engineering with several key implications:

The conversion terms are highly favorable for noteholders, with the $142.38 conversion price sitting well below current market levels near $373. This deep in-the-money position practically ensures mass conversion before the February 20 deadline, effectively transforming this debt into equity.

This debt-to-equity conversion will significantly strengthen MicroStrategy's balance sheet by:

• Eliminating $1.05 billion in debt obligations
• Preserving cash reserves for operations and potential investments
• Removing future interest payment obligations
• Improving key financial ratios like debt-to-equity

The timing is particularly strategic given current market conditions. With the notes maturing in 2027, this proactive refinancing eliminates refinancing risk and potential future cash demands. Based on the conversion ratio of 7.0234 shares per $1,000 principal, this could result in the issuance of approximately 7.37 million new shares, representing material dilution but at a reasonable cost of removing significant debt obligations.

This financial restructuring positions MicroStrategy with a stronger, more flexible balance sheet, though existing shareholders should anticipate equity dilution as the trade-off for improved financial health.

TYSONS CORNER, Va.--(BUSINESS WIRE)-- MicroStrategy® Incorporated (Nasdaq: MSTR) (“MicroStrategy”) today announced that it delivered a notice of full redemption (the “Notice”) to the trustee of MicroStrategy’s outstanding 0.0% Convertible Senior Notes due 2027 (CUSIP No. 594972 AE1) (the “Notes”). The aggregate principal amount of the Notes being redeemed is approximately $1.05 billion, which is equal to the current aggregate principal amount of Notes outstanding and held by investors. The Notice calls for the redemption of all of the outstanding Notes (the “Redemption”) on February 24, 2025 (the “Redemption Date”), at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid special interest, if any, to but excluding the Redemption Date, unless earlier converted.

As a result of the delivery of the Notice, at any time prior to 5:00 p.m., New York City time, on February 20, 2025, the Notes are convertible, at the option of the holders of the Notes, at the applicable conversion rate of 7.0234 shares of MicroStrategy’s class A common stock per $1,000 principal amount (reflecting a conversion price of $142.38 per share).

In the event that any holder delivers a conversion notice as provided in the indenture related to the Notes, MicroStrategy has elected to satisfy its conversion obligation with respect to each $1,000 principal amount of Notes by delivering solely shares of its class A common stock, together with cash in lieu of any fractional shares.

To convert Notes, a holder must comply with the procedures set forth in the indenture governing the Notes, including electronic presentation and surrender of its Notes for conversion through the facilities of DTC.

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 (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 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 October 31, 2024 and in MicroStrategy’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 6, 2025, 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/20250124420061/en/

MicroStrategy Incorporated

Shirish Jajodia

Corporate Treasurer

ir@microstrategy.com

Source: MicroStrategy Incorporated

FAQ

What is the total value of MSTR's 2027 convertible notes being redeemed?

MicroStrategy is redeeming approximately $1.05 billion in 0.0% Convertible Senior Notes due 2027.

When is the redemption date for MSTR's 2027 convertible notes?

The redemption date is set for February 24, 2025.

What is the conversion rate for MSTR's 2027 convertible notes?

The conversion rate is 7.0234 shares of MicroStrategy's class A common stock per $1,000 principal amount, equivalent to $142.38 per share.

How will MSTR settle the convertible notes conversion?

MicroStrategy will settle conversions solely through shares of its class A common stock, with cash only for fractional shares.

What is the deadline for MSTR noteholders to convert their notes?

Noteholders can convert their notes until 5:00 p.m., New York City time, on February 20, 2025.