(Bloomberg) — MicroStrategy Inc. bought $101 million in bitcoin after it said it would use perpetual preferred stock as well as common stock and debt to acquire more of the cryptocurrency.
Most Read from Bloomberg
Virginia-based enterprise software firm Tysons Corner, which has become a leveraged bitcoin proxy, has bought Bitcoin for nine consecutive weeks as co-founder and chairman Michael Saylor aims to advance his Bitcoin holdings strategy.It has about $44.3 billion in bitcoin :
MicroStrategy bought 1,070 bitcoin tokens between Dec. 30 and Dec. 31 at an average price of about $94,000, according to filings with the U.S. Securities and Exchange Commission on Monday.
The company also announced another $1 billion in impairment losses in the fourth quarter.This, combined with the latest purchase, means Bitcoin will grow $17.9 billion on MicroStrategy’s balance sheet to just under $24 billion at the start of the new year. , as the company transitions to fair value accounting for its crypto holdings.
The company said on Friday it plans to raise up to $2 billion through one or more offerings of perpetual preferred stock, which will be senior to its Class A common stock, in the first quarter.The preferred stock offering is part of its plans to raise $42 billion in capital by 2027 MicroStrategy has already exceeded two-thirds of its equity goals, and Saylor said in December that the company is expected to move more into fixed income markets in the first quarter.
Hedge funds are driving some of the demand as they look to MicroStrategy for convertible arbitrage strategies, buying bonds and shorting stocks, essentially betting on the volatility of the underlying stocks.
MicroStrategy needs to continue raising capital to buy bitcoin, as the underlying software business has posted net losses in three of the past four quarters.By issuing a perpetual preferred stock, the company could reach its investor base, according to Benchmark analyst Mark Palmer. that wants lower volatility, such as insurance companies, pension funds and banks.
MicroStrategy’s stock price closed Friday at $330.66, well below its record high of $473.83 on Nov. 20. Bitcoin prices have recently fluctuated around $100,000, hitting an intraday high of $108,316 in December.
MicroStrategy being a leveraged Bitcoin play means it can often track the cryptocurrency’s price movements.
“That volatility itself is a key element of MicroStrategy’s approach, because it allows the company to more easily access the capital market and, in particular, the convertible bond market,” Palmer said If volatility didn’t exist, it would actually be more difficult for him to implement his strategy.”
While MicroStrategy’s volatility helps raise capital, retail investors are often more momentum-driven, so they tend to worry more about downside. 10.3 billion to be able to raise more capital for Bitcoin purchases.MicroStrategy’s stock value by proxy in December down to 9.6% on filing day.
Because the company has fewer shares available for issuance, it’s looking for more flexibility to raise capital to continue buying bitcoin, but that’s a challenge for shareholders, according to Adam Kobeissi, founder of The Kobeissi Letter.
“It’s a lose-lose because on the one hand there are people who say it’s dilutive and they’re selling the stock because they don’t want the permit to go up,” Kobeisi said , that if it doesn’t pass, then they can’t keep buying bitcoin, and the whole investment strategy is kind of broken.”
A vote on the stock increase is scheduled for Jan. 21, according to an SEC filing Friday.Because Saylor is a major shareholder in the company, the change is expected to pass.
If accepted, Kobeisi said the added stake could make MicroStrategy’s stock more volatile as the company becomes more leveraged. , as the company faces other setbacks rather than acting as a proxy for Bitcoin.
Palmer, who has a “buy” rating on the stock, said he believes this drop in the stock price due to the stock increase is “a bit of an overreaction” because the company’s strategy has been to issue shares to buy bitcoin actively is for the benefit of the shareholders.
MicroStrategy previously bought more than $1 billion of tokens in weeks in November and December, but purchases have been lower in recent weeks, even as bitcoin prices have fallen from record highs well ahead of goals, Palmer doesn’t see that as a cause for concern just yet.
“We’ve seen an evolution of the company’s strategy that we don’t think is indicative of a slowdown, it’s more a reflection of the company’s aggressive approach, especially since the US election,” Palmer said. :
English