MicroStrategy to Target a Capital Raise of Up to $2 Billion of Preferred Stock

Rhea-AI Summary

MicroStrategy (MSTR) has announced plans to raise up to $2 billion through public offerings of perpetual preferred stock as part of its broader 21/21 Plan. This initiative aims to raise $21 billion in equity and $21 billion in fixed income instruments over three years.

The preferred stock offering, planned for Q1 2025, will be senior to class A common stock and may include features such as convertibility to class A common stock, cash dividend payments, and share redemption provisions. The company intends to use the proceeds to strengthen its balance sheet and acquire more bitcoin.

The final terms, including the number of depositary shares and pricing, are yet to be determined. The offering will be registered via Form S-3 with the SEC, though MicroStrategy maintains discretion over proceeding with the offering based on market conditions.

Positive

• Part of an ambitious $42 billion capital raising plan ($21B equity + $21B fixed income)
• Potential to significantly strengthen balance sheet through $2B preferred stock offering
• Strategic positioning to acquire more bitcoin, expanding digital asset holdings

Negative

• Potential dilution risk for existing shareholders if preferred stock includes conversion features
• New dividend payment obligations could impact cash flow
• Senior ranking of preferred stock reduces common stockholders' claims on assets

Insights

Financial Strategist

MicroStrategy's ambitious $2 billion preferred stock offering marks a pivotal expansion of their bitcoin acquisition strategy. The move is part of their larger 21/21 Plan targeting $42 billion in capital raises, demonstrating unprecedented institutional commitment to bitcoin accumulation. The preferred stock structure offers several strategic advantages: it provides dividend flexibility, potential conversion rights and doesn't immediately dilute existing shareholders.

The perpetual preferred structure creates a unique hybrid security that combines debt-like features (dividends) with equity-like characteristics (conversion rights). This allows MSTR to raise capital without immediate common stock dilution while maintaining financial flexibility. The timing aligns with bitcoin's halving cycle, suggesting strategic market positioning.

Key implications: 1) Enhanced bitcoin acquisition capacity without immediate equity dilution 2) Improved capital structure flexibility through redemption options 3) Potential arbitrage opportunities between preferred conversion prices and bitcoin holdings value. For simpler understanding: Think of this as MSTR creating a new type of "bitcoin-backed preferred stock" - like a special savings account that pays dividends and can later be converted to regular shares, all while using the money to buy more bitcoin.

Crypto Market Analyst

This capital raise could significantly impact bitcoin's market dynamics. With MSTR already holding substantial bitcoin positions, an additional $2 billion deployment would create considerable buy pressure. The timing, coinciding with the 2024 halving aftermath, could amplify price effects due to reduced mining rewards and tighter supply.

The 21/21 Plan's scale - targeting $42 billion total - represents approximately 2% of bitcoin's current market cap. Such systematic institutional accumulation could fundamentally alter bitcoin's supply-demand dynamics. For context, imagine a whale systematically removing significant bitcoin supply from circulation while creating a new investment vehicle that indirectly tracks bitcoin's performance.

TYSONS CORNER, Va.--(BUSINESS WIRE)-- MicroStrategy Incorporated (Nasdaq: MSTR) (“MicroStrategy”), in furtherance of its previously announced 21/21 Plan, a capital plan to raise $21 billion of equity and $21 billion of fixed income instruments, including debt, convertible notes and preferred stock, over the next three years, today announces it is targeting a capital raise of up to $2 billion through one or more public underwritten offerings (the “Offering”) of perpetual preferred stock which will be senior to our class A common stock. The perpetual preferred stock may include features such as (i) convertibility to our class A common stock, (ii) payment of cash dividends, and (iii) provisions allowing for redemptions of shares, among other features. The Offering is expected to be registered via a registration statement on Form S-3 to be filed with the U.S. Securities and Exchange Commission. The number of depositary shares representing an interest in the perpetual preferred stock to be offered, the final terms of the perpetual preferred stock, and the price for the Offering have not yet been determined. The purpose of the Offering is to allow MicroStrategy to continue to strengthen its balance sheet and acquire more bitcoin. The Offering is expected to occur, if at all, in the first quarter of 2025. However, the decision whether to proceed with and consummate the Offering is in MicroStrategy’s sole discretion and is subject to market and other conditions. MicroStrategy may choose not to proceed with or consummate the Offering at all.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities. Any offers, solicitations or offers to buy, or any sales of securities will be made in accordance with the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). This announcement is being issued in accordance with Rule 135 under the Securities Act.

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 MicroStrategy’s plan to consummate the Offering, size and timing of the Offering, the anticipated use of any proceeds from the Offering, and the terms of the Offering. 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/20250103210137/en/

MicroStrategy Incorporated

Shirish Jajodia

Corporate Treasurer

ir@microstrategy.com

Source: MicroStrategy Incorporated

FAQ

How much is MicroStrategy (MSTR) planning to raise through preferred stock offering?

MicroStrategy is targeting to raise up to $2 billion through public offerings of perpetual preferred stock.

When will MSTR's preferred stock offering take place?

The offering is expected to occur in the first quarter of 2025, subject to market conditions and company discretion.

What is MicroStrategy's 21/21 Plan for MSTR?

The 21/21 Plan is MicroStrategy's capital plan to raise $21 billion in equity and $21 billion in fixed income instruments over three years.

What will MSTR use the preferred stock offering proceeds for?

The proceeds will be used to strengthen MicroStrategy's balance sheet and acquire more bitcoin.

What features will MSTR's preferred stock include?

The preferred stock may include convertibility to class A common stock, cash dividend payments, and share redemption provisions.