MicroStrategy has increased its convertible debt offering to $875 million, up from $700 million. This move, announced on September 18, aims to fund more Bitcoin purchases. The company will raise these funds by selling convertible senior notes. These notes will have an annual interest rate of 0.625% and are set to mature in September 2028. They will be available through a private sale to institutional investors.
Additional Purchase Option
Moreover, initial buyers will have the chance to purchase an extra $135 million in notes within 13 days of the initial issuance. If this option is exercised, total proceeds could reach $997.4 million.
Planned Use of Funds
MicroStrategy estimates that the net proceeds will be around $864.1 million. The company plans to use $500 million to redeem its 6.125% Senior Secured Notes due in 2028. The remaining funds will be used to buy more Bitcoin and for general corporate purposes.
Conversion Rate and Recent Bitcoin Purchases
The conversion rate for the notes is set at 5.4589 shares of MicroStrategy Class A common stock per $1,000 principal amount. This rate represents a 40% premium. This announcement follows MicroStrategy’s recent purchase of 18,300 Bitcoin for $1.11 billion. The firm’s total Bitcoin holdings now stand at 244,800 BTC, worth $9.45 billion. This is approximately $38,585 per Bitcoin. Additionally, MicroStrategy’s Bitcoin holdings have yielded a 4.4% quarterly-to-date return and a 17% year-to-date return.
Stock Performance and New ETFs
Following the announcement, MicroStrategy’s stock rose by 2% to $133.23 per share in intraday trading. Over the past year, the stock has surged more than 110%, according to Yahoo Finance data.
In related news, REX Shares and Tuttle Capital Management are launching new ETFs. These ETFs will provide 200% leveraged exposure and -200% inverse exposure to the daily price movements of MicroStrategy’s MSTR shares. The T-REX 2X Long MSTR Daily Target ETF (MSTU) and T-REX 2X Inverse MSTR Daily Target ETF (MSTZ) will trade on the Cboe BZX Exchange.
Bloomberg senior ETF analyst Eric Balchunas commented that these new ETFs have significantly higher volatility than the S&P 500. He estimates their volatility to be about 15 times greater. Balchunas also suggested that these ETFs may outperform Defiance’s 1.75x leveraged MSTR ETF, which has already seen strong demand.
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