In a move that could significantly expand its Bitcoin holdings, MicroStrategy, the largest corporate holder of Bitcoin, is exploring a $2 billion perpetual preferred stock offering. This initiative will enable the business intelligence firm to strengthen its balance sheet and increase its Bitcoin reserves.
Background on the Plan
MicroStrategy’s "21/21" plan aims to raise $21 billion in equity and $21 billion in fixed-income instruments. The company has already made significant progress in implementing this strategy, utilizing senior convertible notes and debt to fuel its Bitcoin buying spree. However, the perpetual preferred stock offering is a separate initiative that will allow MicroStrategy to tap into additional funding sources.
The Perpetual Preferred Stock Offering
MicroStrategy intends to use the proceeds from the perpetual preferred stock offering to purchase more Bitcoin. The offering will be available through various means, including:
- Converting MicroStrategy’s class A common stock
- Paying a cash dividend
- Redeeming shares or a combination of these
The company has emphasized that the decision to proceed with the offering is entirely within its discretion and subject to market conditions. This means that MicroStrategy may choose not to pursue the offering at all.
Senior Status of Perpetual Preferred Stock
It’s worth noting that the perpetual preferred stock will have senior status in the event of bankruptcy or liquidation, placing holders ahead of MicroStrategy’s class A common stockholders.
MicroStrategy’s Bitcoin Holdings
As of January 2024, MicroStrategy owns an impressive 446,400 Bitcoin, valued at approximately $43.9 billion. The company has been actively purchasing Bitcoin over the past year, with its largest single-year purchase occurring in 2023 when it acquired 257,250 Bitcoins.
Dollar-Cost Averaging and Returns
MicroStrategy’s average cost per Bitcoin is $62,500. Given the current market value of its holdings, the company has realized a staggering 57.2% return on investment. This impressive performance has been instrumental in driving up MicroStrategy’s share price.
Michael Saylor’s Vision for Corporate Bitcoin Adoption
Executive Chairman Michael Saylor has played a pivotal role in shaping MicroStrategy’s Bitcoin strategy and fostering corporate adoption of the digital currency around the world. His leadership has not only benefited MicroStrategy but also helped to drive up its share price, which has increased by 13.2% on January 3 to $339.6.
Benefits for Shareholders
MicroStrategy’s Bitcoin investment strategy has yielded substantial returns for shareholders, with shares increasing by 438% over the past year. The company’s decision to raise additional funding through a perpetual preferred stock offering is expected to further boost its share price and solidify its position as a leader in corporate Bitcoin adoption.
Challenges Ahead
While MicroStrategy’s plan to raise $2 billion for more Bitcoin purchases is ambitious, it also comes with risks. The company must navigate market conditions and ensure that the perpetual preferred stock offering aligns with its overall financial strategy.
Conclusion
MicroStrategy’s perpetual preferred stock offering presents a significant opportunity for the company to expand its Bitcoin holdings and solidify its position as a leader in corporate adoption of digital currencies. As the company continues to drive innovation and growth, it will be essential to monitor market trends and adapt its strategy accordingly.
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Further Reading
- MicroStrategy will eventually unravel — Bitcoin bulls should look elsewhere
- Big Questions: How can Bitcoin payments stage a comeback?
