Cloud software company MicroStrategy, a leading bitcoin investment company, announced today its intention to buy an additional $400 million of bitcoin to add to the 92,079 bitcoin ($3.3 billion) it already has in its vault.
MicroStrategy announced that these bitcoins will be held under a new subsidiary called MacroStrategy.
The $400 million will allow the company to buy 11,215 bitcoins at the announcement price (the price of bitcoin was $35,666).
To raise the necessary funds for the purchase, Micro Strategy will resort to its own trick of selling bonds.
Bonds are debt that people can buy, with the promise of getting the principal back with interest.
In this case, institutions can buy debt in a “micro-strategy,” which the company will then use to buy more bitcoin, which they believe will increase in value (or at least retain better value than the dollar).
In this sale, MicroStrategy is issuing a highly secured bond maturing in 2028.
In previous bond sales, MicroStrategy sold large convertible bonds.
The primary difference with the recent purchase is that the convertible notes have the option to convert them into shares of MSTR stock.
Market data points to MicroStrategy’s relentless pursuit of bitcoin without cash.
According to a Bloomberg report:
The private placement is $23 million more than the company’s full operating cash flow since 2016.
MicroStrategy, ostensibly a cloud-based software and analytics company, indirectly became the owner of the Bitcoin Public Traded Fund.
MicroStrategy Inc’s stock fell 3% today on the back of the new news announced, settling at just under $470.
Its existing bonds took even bigger hits in the bond markets, dropping in value by 9%.
The $900 million convertible bond it sold in February at $101.25 is now down to $66.62, according to data from Morningstar.
Bloomberg describes corporate debt issued for the latest bitcoin purchase as junk bonds, meaning they are at greater risk of default.
As if to underscore the point that it is playing a high-risk game with a volatile asset, MicroStrategy posted in SEC filings on its website today noting that the company was incurring a $284.5 million impairment loss based on fluctuations in the market price of bitcoin. during the second quarter of 2021.
Bitcoin price has fallen from an all-time high of $63,501 on April 12 to nearly $32,800 today.
What is certain is that the “micro-strategy” bet on Bitcoin is no longer as profitable as it once seemed.
However, her investment paid off on paper.
According to MicroStrategy, she bought her bitcoin at an average price of $24,450 per bitcoin.
Even with the monotonous spring of Bitcoin, MicroStrategy made more than $1 billion in unrealized gains (before tax credits).
But Michael Saylor, CEO of MicroStrategy, isn’t about to sell, at least not in the way that Tesla sold some of its $1.5 billion bitcoin investment earlier this year, Elon Musk said, to prove liquidity. Bitcoin.
Saylor made it clear over and over again when he appeared on stage at the 2021 Bitcoin Conference in Miami last weekend and hugged Max Keizer, who shouted at the top of his voice:
We do not sell! Damn Elon!
The publicly traded company already owns an estimated 72% of its bitcoin treasury, making its stock the closest thing to a bitcoin ETF in the US market.
With this additional purchase, her bitcoin fortune will increase.
With more purchases expected in the future.