USDMicroStrategy Eyes $2 Billion Stock Offering to Fuel Bitcoin Stash
Ambitious Funding Plan Targets Record Bitcoin Accumulation
MicroStrategy, the largest corporate holder of Bitcoin, unveiled plans to raise $2 billion through a perpetual preferred stock offering to bolster its aggressive Bitcoin acquisition strategy. This move underscores the company’s commitment to its ambitious “21/21” plan, which aims to secure $42 billion in funding over three years through a mix of equity and fixed-income securities. The latest offering, detailed in a January 3 statement, is separate from this overarching strategy and designed to further strengthen the firm’s balance sheet.
MicroStrategy’s Bitcoin-focused strategy has been a defining characteristic of the company’s approach under Executive Chairman Michael Saylor. Over the past year, the firm purchased 257,250 Bitcoin—its largest acquisition year to date—bringing its total holdings to 446,400 BTC, valued at $43.9 billion according to Bitcoin Treasuries. With an average acquisition cost of $62,500 per Bitcoin, MicroStrategy has achieved a 57.2% gain on its investment amid Bitcoin’s 121% annual price surge.
Despite these gains, the stock market reaction to the proposed offering has been mixed. Shares of MicroStrategy (MSTR) dropped 0.19% following the announcement, closing at $339.6 on January 3. This marks a sharp contrast to the company’s 438% year-over-year increase in share price, which has been bolstered by Bitcoin’s rally and the firm’s inclusion in the Nasdaq 100 index in December. However, after-hours trading on Monday saw MSTR shares dip below $300, a staggering 46% decline from their November peak of $543.
Critics have raised concerns about the sustainability of MicroStrategy’s funding approach, which relies heavily on increased debt and equity issuance. The Kobeissi Letter described the firm’s proposal to expand Class A common shares by 10 billion and preferred shares by one billion as a “lose-lose” scenario, potentially diluting shareholder value or limiting the company’s capacity to leverage further Bitcoin purchases.
The perpetual preferred stock offering, expected to take place within the current quarter, remains subject to market conditions and the company’s discretion. Categorized as “senior” to its Class A common stock, the offering prioritizes holders in the event of bankruptcy or liquidation. MicroStrategy has outlined several potential execution methods, including converting Class A shares, paying cash dividends, or redeeming shares, leaving room for flexibility.
MicroStrategy’s unrelenting focus on Bitcoin has both fueled its market gains and exposed it to significant volatility. The company’s “21/21” strategy aims to raise $21 billion each in equity and fixed-income instruments, a plan that aligns with its reputation as a Bitcoin pioneer. However, with MSTR shares losing nearly half their value since November, questions remain about the balance between bold ambitions and financial risks.
This article has been refined and enhanced by ChatGPT.
