is borrowing $400 million in junk bonds to buy more bitcoins, adding to the company’s bet that digital assets will outperform cash.
This is the Tysons Corner, Va., company’s third bond sale to purchase bitcoins in less than a year. The new notes due in 2028 will be backed by claims on the business and “any bitcoins or other digital assets” acquired after the deal closes, excluding any claim on the company’s existing digital-asset portfolio.
In a filing Monday, MicroStrategy said it expects to post a $284.5 million loss, “based on fluctuations in market price of bitcoin,” during its next earnings report. The company held more than 92,000 bitcoins as of mid-May, according to company filings.
Prices on the company’s existing debt have fallen in recent months. The company’s $550 million convertible note due 2025 recently traded at 135.073 cents on the dollar, according to MarketAxess. That is down from around 200 cents at the start of April. Investors can exchange convertible debt for stock if shares hit a predetermined price.
MicroStrategy’s $1 billion convertible note due 2027 is trading at 67.307 cents on the dollar, implying a 7.089% yield. That is down from around 101 cents in February. The company’s share price fell 3.1% Monday to $469.81.
MicroStrategy, which sells data analytics software and services to businesses, caught investors’ attention over the past year by betting big on bitcoin.
Last year, the company sold over $1.6 billion of convertible bonds to purchase the cryptocurrency.
Shares of MicroStrategy are up more than 364% from August 2020, the same month that the company announced its first bitcoin investment, beating the S&P 500’s nearly 28% gain over that period.
The price of bitcoin has declined significantly since MicroStrategy’s stock peaked, trading around $36,000 on Monday from highs in April over $62,000. MicroStrategy shares are down more than 60% from a record of around $1,272 in February.
MicroStrategy has paid an average of $24,450 per bitcoin as of May 18, according to company filings.
MicroStrategy’s revenue has barely grown in a decade, rising to more than $480 million last year from $455 million in 2010. But the bitcoin purchases have attracted attention and new business, some analysts say. New accounts on the MicroStrategy website grew 281% in the first quarter, according to data compiled by analysts at Canaccord Genuity.
the company’s chief executive, has said buying bitcoins is intended to keep the company’s purchasing power from going down. He expects a rise in inflation to erode the value of cash over time. MicroStrategy’s existing bitcoin portfolio will be held by a newly formed subsidiary,…
Read more:MicroStrategy to Sell New Bitcoin Bond