According to a statement on September 18, MicroStrategy has increased the size of its convertible note offering from $700 million to $875 million in order to purchase more Bitcoin.
The Virginia-based company aims to raise these funds by selling convertible senior notes with an annual interest rate of 0.625%. These senior unsecured debt obligations will be offered to institutional investors in a private sale. The notes are scheduled to mature in September 2028.
The company also said it plans to offer initial buyers an option to purchase an additional $135 million worth of bonds within 13 days of the initial issuance.
MicroStrategy estimates that it will raise approximately $864.1 million in net proceeds from the sale. The company plans to use a portion of the proceeds from the sale to redeem $500 million of its 6.125% senior secured notes due 2028, with the remaining proceeds to be used for Bitcoin purchases and general corporate purposes.
If the initial purchasers exercise their option to purchase additional notes, proceeds could reach $997.4 million.
The notes have a conversion rate of 5.4589 shares of MicroStrategy Class A common stock per $1,000 principal amount, representing a premium of 40%.
The move follows MicroStrategy's recent purchase of 18,300 Bitcoin for $1.11 billion. The company's Bitcoin holdings are now at 244,800 BTC, valued at $9.45 billion, or $38,585 per Bitcoin. MicroStrategy reports that its BTC holdings have returned a 4.4% yield quarter-to-date and a 17% yield year-to-date.
MicroStrategy shares rose 2% to $133.23 in intraday trading on the news. The company's shares have surged more than 110% in the past year, according to data from Yahoo Finance.
“Hot sauce”
MicroStrategy's latest move coincides with the launch of a new exchange-traded fund (ETF) by REX Shares and Tuttle Capital Management that offers 200% leveraged exposure and -200% inverse exposure to the daily price movements of the firm's MSTR shares.
According to a Sept. 18 announcement, the T-REX 2X Long MSTR Daily Target ETF (MSTU) and the T-REX 2X Inverse MSTR Daily Target ETF (MSTZ) will trade on the Cboe BZX exchange.
Eric Balchunas, senior ETF analyst at Bloomberg, said REX and Tuttle have “broken the volatility barrier again” with these ETFs, which he estimates to be about 15 times more volatile than the S&P 500.
Balchunas added that the new ETF is likely to outperform Defiance's 1.75x leveraged MSTR ETF, which is already seeing strong demand.
Mentioned in this article
