protos.com
For the first time ever, MicroStrategy admitted that over the course of a single week, it diluted all four classes of the company’s public securities.
The liquidations are classed as accretive dilution because the sales allow the company to buy slightly more bitcoin ($BTC) than the proceeds of its sales.
This is only possible, of course, because investors bid up its shares to a premium to its $BTC holdings, and founder Michael Saylor obviously hopes to continue attracting bids that maintain it.
The company made $472 million in net proceeds by dumping shares of MSTR, $STRK, STRF, and STRD at-the-market (ATM). By immediately diluting prior shareholders in each category, the company then bought the same amount of $BTC.
This confusing exercise — diluting shareholders to buy $BTC for shareholders — has become commonplace at MicroStrategy.
By focusing on the 21 million supply cap of $BTC and its potential for parabolic price appreciation, the company slowly adds risky leverage to its balance sheet to gobble up more of the limited supply of $BTC.
Read more: Bitcoin boom adds billions to these government holdings
MicroStrategy still trading at a cushy $BTC multiple
Gaining affirmation from Wall Street for this behavior, the company’s common stock enjoys a generous 1.7X multiple to its $72 billion $BTC treasury.
Indeed, the company now owns 601,550 $BTC or 2.9% of its maximum supply. Vanishingly few entities with larger holdings remain: Blackrock’s IBIT ETF, Satoshi Nakamoto, and a few others.
MicroStrategy holds even more $BTC than Binance.
The company’s most recent 8-K filing disclosed its sale of 797,008 common MSTR shares plus 573,976 $STRK, 444,005 STRF, and 158,278 STRD.
$STRK, STRF, and STRD are dividend-yielding preferred stocks that are senior to common shareholders but junior to debtholders.
MicroStrategy promptly used the money to buy 4,225 $BTC at an average price of $111,827 per coin. The currency then rallied north of $122,000 after its purchases last week — putting every purchase by the company in profit.
The company’s cost basis is $71,268. As of publication time, the unrealized return on that investment exceeds 68%.