MicroStrategy boosts Bitcoin buying power with $875M convertible debt offering

MicroStrategy has increased its convertible debt offering to $875 million from $700 million to purchase more Bitcoin, according to a Sept. 18 statement.

The Virginia-based company aims to raise these funds by selling convertible senior notes with an interest rate of 0.625% annually. These unsecured senior obligations will be available to institutional investors in a private sale. The notes are set to mature in September 2028.

The company also revealed plans to offer initial buyers an option to purchase an additional $135 million in notes within 13 days of the first issuance.

MicroStrategy estimates that the net proceeds from this sale will reach approximately $864.1 million. The firm plans to redeem $500 million of its 6.125% Senior Secured Notes due in 2028 with part of the proceeds, while the remaining funds will be used to buy more Bitcoin and for general corporate purposes.

If initial buyers exercise the option to purchase more notes, proceeds could reach $997.4 million.

The notes’ conversion rate is set at 5.4589 shares of MicroStrategy class A common stock per $1,000 principal amount, which represents a 40% premium.

This move 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, or $38,585 per Bitcoin. MicroStrategy reported that its BTC holdings have seen a 4.4% quarterly-to-date yield and a 17% year-to-date yield.

Following this news, MicroStrategy’s stock increased by 2% in intraday trading to $133.23 per share. The stock has surged more than 110% over the past year, according to Yahoo Finance data.

‘Hot Sauce’

MicroStrategy’s latest move coincides with REX Shares and Tuttle Capital Management launching new exchange-traded funds (ETFs) that offer 200% leveraged exposure and -200% inverse exposure to the company’s MSTR shares daily price movements.

According to a Sept. 18 announcement, 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 REX and Tuttle “re-broke the volatility barrier” with these ETFs, estimating their volatility to be about 15 times higher than that of the S&P 500.

Balchunas added that the new ETFs will likely outperform Defiance’s 1.75x leveraged MSTR ETF, which has already seen strong demand.

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