MicroStrategy to Dive Further into Bitcoin with Additional $550M USD Investment

There are countless diehard believers in Bitcoin around the world.  Very few though, if any, have demonstrated this belief more than MicroStrategy CEO, Michael Saylor.  This was further emphasized with the company’s recent announcement that it is looking to purchase another $550M USD worth of the top digital asset.

$550M Raise

In order to make this purchase, MicroStrategy has indicated that it hopes to raise the capital necessary through the sale of ‘convertible senior notes’.  MicroStrategy states,

“The notes will be unsecured, senior obligations of MicroStrategy, and will bear interest at a rate of 0.750% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2021. The notes will mature on December 15, 2025, unless earlier repurchased, redeemed or converted… 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”.

Despite the size of this raise, MicroStrategy intends to focus solely on increasing its exposure to Bitcoin, bolstering its treasury reserve with the inflation-resistant digital asset.

“MicroStrategy intends to invest the net proceeds from the sale of the notes in bitcoin,”

Existing Exposure

As previously indicated, the decision to raise capital for the purpose of purchasing Bitcoin is not the first foray into digital assets for MicroStrategy.  Roughly two months ago, the company made waves with its first purchase of 21,454 BTC.  Not content with these holdings, the company doubled down on its investment, purchasing an additional 16,796 BTC soon after.

While there is no indication yet as to which company MicroStrategy will be partnering with to make the actual purchase of Bitcoin, each of the company’s past purchases were facilitated by Coinbase.

Perfect Timing?

Justifying these moves, the purchases – which equated to roughly $425M USD at time of purchase – have grown significantly in value since.  These massive returns are believed to equate to roughly $250M USD at this time.  A staggering return in a short amount of time.

Despite the massive return generated on the first phase of this investment, recent news of the company’s intent to raise an additional $550M USD for purchasing more BTC was not met with enthusiasm by all outside sources.

This was recently on display as Citi analysts downgraded MicroStrategy stock from ‘neutral’ to ‘sell’.  Those responsible for this change indicated that the company was showing a ‘disproportionate focus’ on digital assets.

Time will tell if Citi is correct in downgrading this stock.  While it may be right in its trepidation due to this focus on digital assets, one thing is for certain – MicroStrategy is all in on Bitcoin.  They will either sink or soar on the backs of these decisions.

Conversions

While Citi may not be convinced of the merits behind the decision to raise $550M USD for purchasing Bitcoin, other high-profile investors have been converted into believers, weighing in on the move with a more positive stance.

Billionaire, Ray Dalio, recently expressed a shared belief in the future of assets like Bitcoin as he envisions a future where central banks continue to print cash, resulting in unchecked inflation.

“I think that bitcoin (and some other digital currencies) have over the last ten years established themselves as interesting gold-like asset alternatives, with similarities and differences to gold and other limited-supply, mobile (unlike real estate) storeholds of wealth. So it could serve as a diversifier to gold and other such storehold of wealth assets.” – Ray Dalio

While not commenting directly on the decisions of MicroStrategy, another high-profile investor which recently showed signs of warming up to Bitcoin is Kevin O’Leary.  The enigmatic businessman recently stated that if a Bitcoin ETF were to be approved by the SEC, he would allocate roughly 5% of his portfolio – a number suppressed by the currently volatility of BTC for the time being.

“If that was the case, if tomorrow morning we woke up and the SEC said you can create an ETF with bitcoin and we think bitcoin is a legitimate, you know, payment system and store of wealth, not only would it go up but you’d have a lot of people like me investing in it… I’d say okay I’m going to give it a 5% weighting so you know I don’t really want a significant portion of my portfolio having that amount of volatility.” – Kevin O’Leary

MicroStrategy

Founded in 1989, MicroStrategy is one of the world’s leading business intelligence firms.

CEO, Michael Saylor, currently oversees company operations.