MicroStrategy Buys Another $786 Million in Bitcoin After Convertible Note Sale

MicroStrategy continues to invest heavily in Bitcoin, with its latest purchase of 11,931 BTC. Source: Jorge Eduardo, Adobe Stock

Bitcoin development company MicroStrategy announced its purchase of another 11,931 BTC on Thursday, bringing its total holdings up to 226,331 coins.

MicroStrategy Buys Almost 12,000 Bitcoin

The recent purchase – worth $786 million – was funded through the company’s recent convertible debt offering , which successfully raised $800 million upon closing on June 18. Each coin was bought at an average price of $65,883.

This marks another successful debt offering from MicroStrategy, with investors willing to accept the minimum 2.25% annual yield offered by the company’s convertible bonds.

Alternatively, investors can convert their investments into MSTR stock at a rate of $2,043.32 per share – roughly 35% above its current market price – should the stock’s value rise above this figure before the bonds expire on June 15, 2032.

This effectively amounts to a call option on MSTR stock for bond investors, with the minimum promise of getting their money back plus a small yield if things go south.

Earlier this month, MicroStrategy announced a notice of redemption on its first round of convertible bonds issued in December 2020.

Given MSTR’s drastic rise above the predetermined conversion rate of $397.77 per share, investors are largely expected to convert their shares before July 11, potentially causing major dilution for MSTR shares.

MSTR VS BTC: What’s The Better Buy?

The price of MSTR has largely been dictated by the price of Bitcoin in recent years.

Experts like James Butterfill, Head of Research at CoinShares, have referred to the stock as a “leveraged play on Bitcoin prices”, with the stock’s price typically moving in line with the cryptocurrency at a 1.5X volatility multiple.

MicroStrategy has converted almost the entirety of its balance sheet into BTC, with the coins on its balance sheet now worth $14.7 billion.

Prior to its most recent purchase, the company was up 83.7% ($6.3 billion) in unrealized profits on its entire Bitcoin stack.

MicroStrategy executive chairman Michael Saylor has previously touted the company as a Bitcoin ETF with perks, including the use of modest leverage and no management fee.

By contrast, critics have said the company is overvalued compared to typical Bitcoin ETFs, with its $26 billion market cap almost double the size of its Bitcoin AUM.

Other companies, including Japanese public firm MetaPlanet , have begun mimicking MicroStrategy in recent months, leveraging capital markets to purchase more Bitcoin (BTC).