2025-1-7 06:00 |
MicroStrategy, the major enterprise software company that has evolved into a Bitcoin (BTC) investment platform, has captured attention once again with its latest purchase of $101 million in BTC.
The company, led by chairman and co-founder Michael Saylor, has committed to utilizing perpetual preferred stock, common shares, and debt to fuel its ongoing Bitcoin purchasing strategy.
MicroStrategy Eyes $42 Billion Capital Raise By 2027In a filing with the US Securities and Exchange Commission (SEC), MicroStrategy disclosed that it purchased 1,070 Bitcoin tokens at an average price of approximately $94,000 on December 30 and 31, 2024.
This brings the company’s total Bitcoin holdings to an impressive 447,470 BTC, acquired for around $27.97 billion at an average price of $62,503 per Bitcoin.
Notably, Saylor highlighted in a social media post on X (formerly Twitter), that the company achieved a Bitcoin yield of 48% for the fourth quarter of 2024 and 74.3% for the entire fiscal year.
MicroStrategy’s ambitious plans extend beyond Bitcoin acquisitions. On Friday, the firm announced its intention to raise up to $2 billion through offerings of perpetual preferred stock, which will hold seniority over its Class A common stock.
This move is part of a larger strategy to raise $42 billion in capital by 2027 through various means, including at-the-market stock sales and convertible debt offerings. With more than two-thirds of its equity goals already met, the company is expected to pivot towards fixed-income markets in the near future.
The demand for MicroStrategy’s stock (MSTR) has notably increased among hedge funds, which are employing convertible arbitrage strategies that involve purchasing bonds and short-selling shares.
This strategy capitalizes on the volatility of MicroStrategy’s stock, a characteristic that has become a cornerstone of its business model. Benchmark analyst Mark Palmer remarked:
That volatility itself is a key element of MicroStrategy’s approach because it enables the company to tap into the capital markets and particularly the convertible bond market more easily.
MicroStrategy’s recent proposal to increase the number of authorized shares of Class A common stock from 330 million to 10.3 billion has sparked fears of share dilution, leading to a significant drop in the company’s stock price.
MicroStrategy’s Bold Bitcoin Strategy Faces HeadwindsOn the day of the proxy filing in December, shares fell by as much as 9.6%. Adam Kobeissi, founder of The Kobeissi Letter, noted the dilemma faced by investors, stating:
It’s a lose-lose because on one hand you have people saying that it’s dilutive and they’re selling the stock… but on the other hand you have people saying if it doesn’t pass, then they can’t keep buying Bitcoin and the whole investment strategy is kind of broken.
A vote on the share increase is scheduled for January 21, 2025, and with Saylor being a significant shareholder, the amendment is expected to pass. Should it be approved, the increase in shares could lead to further volatility in MicroStrategy’s stock price as the company becomes more leveraged.
Although the company has typically outperformed Bitcoin, it has faced challenges in recent months, underlining that its performance is influenced by factors beyond just cryptocurrency prices.
Despite the recent fluctuations, Palmer maintains a “buy” rating on MicroStrategy’s stock. He believes the market’s reaction to the proposed share increase has been an overreaction.
“The company’s strategy has been to issue shares to make accretive Bitcoin purchases which can accrue to the benefit of shareholders,” he commented.
MicroStrategy’s aggressive approach to Bitcoin acquisitions has seen it make significant purchases exceeding $1 billion in late 2024, although recent weeks have seen a slowdown in these activities amidst fluctuating Bitcoin prices.
Palmer reassured investors, stating, “We’ve seen a pull forward of the company’s strategy, which is not indicative of a slowdown… it’s more a reflection of the aggressive approach that the company has taken.”
At the time of writing, the market’s leading crypto is inching closer to the $100,000 milestone, trading at $99,340, up 2% in the last 24 hours.
Featured image from DALL-E, chart from TradingView.com
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