MicroStrategy can sell up to $ 1 billion of its own shares for additional investment in Bitcoin. The company published the corresponding application for the Securities and Exchange Commission (SEC) on its website. In a document filed with the US Securities and Exchange Commission on Monday (June 14, 2021), MicroStrategy said it would launch an “on the market” offer that would allow the company to sell its Class A common shares, which are convertible Bitcoin bonds.
Bitcoin doesn’t provide payment of interest or other income
At first glance, it seems surprising that just on the eve of MicroStrategy announced the placement of convertible bonds in the amount of $ 500 million for the purchase of Bitcoin. That is, for exactly the opposite purpose. However, it should be borne in mind that if the company doesn’t start fixing profits, its assets in the form of Bitcoin will exceed $ 4 billion.
MicroStrategy explained its intention to the SEC by the fact that Bitcoin doesn’t provide payment of interest or other income. So the only way to get the proceeds necessary for the company’s activities is to “convert into cash” part of the cryptocurrency using the difference in price.
An excerpt from the doc reads:
“We intend to use the net proceeds from the sale of any Class A ordinary shares offered under this prospectus for general corporate purposes, including the purchase of Bitcoin, unless otherwise specified in the applicable prospectus appendix. We haven’t determined the amount of net proceeds to be used specifically for any specific purpose”.
On June 14, MicroStrategy announced that it has completed a $ 500 million bond placement. The funds will be invested in Bitcoin. The first cryptocurrency traded at $ 40.1 thousand, over the past day it has risen in price by 1.5%.
After the announcement of the company, its shares rose sharply. At the close of the session on Monday, the value of MicroStrategy securities on the Nasdaq rose 16% to $ 598.
MicroStrategy is not a trader, but a hodler
MicroStrategy CEO Michael Saylor is a well-known Bitcoin proponent. Earlier in June, he revealed that he began acquiring BTC back in June 2020 after he discovered that holding shares in large tech companies wasn’t working.
Meanwhile, MicroStrategy made its first Bitcoin purchase in August last year and has been increasing its Bitcoin portfolio since then.
At the moment, MicroStrategy is the largest Bitcoin holder among public companies. According to CEO Michael Saylor, the company owns 92,000 BTC. In the near future, after the acquisition of cryptocurrency for another $ 500 million, this amount may exceed 100 thousand.
According to SEC filings, the firm said it has no plans to trade Bitcoin. It holds the asset for the long term.
“We view our Bitcoin holdings as long-term and we do not plan to engage in regular Bitcoin trading or hedge or otherwise enter into derivative contracts with our Bitcoin holdings, although we may sell Bitcoins in the future if needed to generate cash for treasury management and other general corporate purposes”.