MicroStrategy plans second convertible debt offering this month to buy more bitcoin

By Medha Singh

(Reuters) -MicroStrategy is planning to raise capital through convertible bonds offering to buy bitcoin for the second time in less than 10 days, as the aggressive crypto investor looks to increase its exposure to the booming cryptocurrency.

The software firm said after markets closed on Wednesday that it was offering $500 million in convertible notes due in 2031 to institutional investors. The company had announced a $600 million private offering in convertible notes on March 5.

Its shares dropped 7% on Thursday, after hitting a 24-year high in the previous session. The stock has surged nearly threefold so far in 2024.

Bitcoin, the world’s largest cryptocurrency, hit a fresh record high at $73,803, taking its year-to-date gains to nearly 70%.

The Tysons, Virginia-based firm has joined a slew of companies offering convertible bonds in a high interest rate environment.

“MicroStrategy is now single handedly making it clear there is nothing restrictive about the (monetary) policy environment,” said Michael O’Rourke, chief market strategist at JonesTrading.

“Since late 2020, the company has come to market with convertible offerings and to a lesser extent at-the-market stock offerings for the specific purpose of investing the proceeds in bitcoin. It appears it is now becoming a weekly event.”

Convertible notes, which can be exchanged for shares when the stock hits a predetermined level, offer companies an option to raise capital at lower interest rates than regular bonds without the risk of immediately diluting shareholders like stock offerings do.

MicroStrategy is marketing the corporate bonds at an yield of 0.375%-0.875% with an option to convert when the stock climbs 40% to 45% above current levels, according to LSEG IFR data.

Citigroup and Barclays, the bookrunners for the deal, declined to comment on investor interest in the offering.

MicroStrategy, which began buying and holding bitcoins in 2020, is the largest corporate holder of the cryptocurrency as revenue from its software business eased in 2022 and 2023.

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The company bought 15,000 bitcoins since Feb. 15, taking its total holdings to 205,000 as of March 10.

Separately, crypto exchange Coinbase priced an upsized convertible bond offering of $1.1 billion to repay or redeem its outstanding convertible debt and notes maturities.

(Reporting by Medha Singh in Bengaluru, additional reporting by Lance Tupper and Manya Saini; Editing by Shilpi Majumdar)