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MicroStrategy stock slides after announcing $400M debt raise to buy BTC

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MicroStrategy has announced that it plans to raise $ 400 million for the subsequent purchase of Bitcoin. It will place a bond issue maturing in 2028. This makes it MicroStrategy’s third debt offering. After the news, the company’s shares fell 2.17%. Thus, after peaking at $ 1,135 in early February, the company’s shares fell more than 60%. However, the company has ignored all the risks and wants to raise more debt and buy Bitcoin again.

Accredited investors will become buyers of securities. The bonds will receive the status of senior obligations.

The company will use the funds raised from the placement to buy Bitcoin. However, the company stressed that they will wait for suitable market conditions, and does not know when they will come, and whether they will come at all.

The company’s press release indicates that MicroStrategy will transfer all of its cryptocurrency to a newly created subsidiary, MicroStrategy LLC.

Recall that in December last year, MicroStrategy planned to issue bonds for $ 400 million, but investor demand was so high that the company’s management increased the number of securities in the offer and the total amount was $ 650 million.

MicroStrategy has no plans to stop buying Bitcoin

Although MicroStrategy has already invested over $ 2 billion in cryptocurrency, the business intelligence giant has no plans to stop buying. The American company continues to accumulate BTC. Since the new year, the company has already bought Bitcoin six times.

According to Bitcoin Treasurues, Microstrategy is currently the largest cryptocurrency holder among public companies. It owns 92 thousand digital coins worth over $ 3.3 billion. MicroStrategy spent $ 2.2 billion on the purchase of digital coins. Based on this, its paper profit from investments in Bitcoin is $ 1.1 billion.
In February 2021, the company has already issued bond loans in the amount of $ 900 million for subsequent investments in cryptocurrency.

The last time MicroStrategy bought bitcoins was in mid-May of this year. Then the company paid $ 10 million for 229 digital coins. The average purchase amount for one Bitcoin was $ 43.6 thousand.

Business model

Fortune 500 CEO Michael Saylor has maintained his position and the company’s position towards acquiring more Bitcoin. During a recent conference, Saylor noted that despite recent price action in the BTC market due to Elon Musk’s tweets, the focus is on its growing proliferation.

Earlier it became known that 32 companies own Bitcoins worth almost $ 12 billion.

Microstrategy is the leader among the institutions with the most BTC holdings. It was followed by Tesla with 43,200 BTC and Square with 8,027 BTC.

However, some experts criticize MicroStrategy’s Bitcoin buying business model. They note that the company spends other people’s money on investing in cryptocurrencies, and this bears little resemblance to a business in general. Experts also fear that MicroStrategy risks becoming insolvent if Bitcoin falls by more than 50% in the future.