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MicroStrategy Increases Its Convertible Debt Sale By Another $200 Million To Buy More Bitcoin

MicroStrategy, a Bitcoin development firm, stated on Friday that it has raised its convertible note offering by an additional $200 million, resulting in a total sale size of $700 million.

MicroStrategy Raises Debt Offering For Bitcoin

The company announced the pricing of its convertible bonds at an annual interest rate of 2.25%. This rate represents an increase from the 0.875% offered in March but remains significantly lower than the Federal Reserve’s current benchmark interest rate of 5.25%.

“MicroStrategy also provided the initial purchasers of the notes an option to buy up to an additional $100 million aggregate principal amount of the notes within a 13-day period starting from the date of issuance,” the company added.

The offering is scheduled to conclude on June 17, with the notes maturing on June 15, 2032. The proceeds from the sale will be utilized to acquire more Bitcoin and for general corporate purposes.

A convertible bond is a form of debt that offers investors a moderate interest rate, typically below prevailing market rates for loans.

However, it also serves as a call option, allowing investors to convert their funds into company shares at a predetermined conversion rate in the future, potentially benefiting if the stock price rises significantly over time.

The latest offering enables investors to convert their funds at an effective rate of $2,043.32 per share, which is a 35% premium over its current price. If bondholders choose to convert, this could lead to stock dilution for existing MSTR investors.

“MicroStrategy anticipates that the net proceeds from the notes’ sale will amount to approximately $687.8 million (or approximately $786.0 million if the initial purchasers fully exercise their option to purchase additional notes),” the company stated.

Is The Worst Is Over For MSTR?

On Thursday, MicroStrategy announced it had issued a full notice of redemption for its initial round of convertible notes issued in December 2020, which were used to acquire $650 million worth of Bitcoin. The company pledged to repay investors at 100% of their original offering.

Note holders have until July 11 to decide whether to convert their notes at the predetermined rate of $397.77 per share. This conversion could potentially dilute up to 1.6 million MSTR shares.

As of Yahoo Finance data, MicroStrategy currently has 15.77 million shares outstanding, with an average daily trading volume of 1.78 million shares over the past three months.

While the prospect of dilution might prompt some investors to sell off their shares, some MSTR investors believe the company has already weathered the worst of its share dilution concerns.

Furthermore, future conversions of MicroStrategy’s remaining bonds are expected to result in less dilution compared to its initial offering.

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