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The business intelligence and analytics company announced the move on June 8 which CEO Michael Saylor tweeted on his feed a few hours later. The notes will be sold in a private offering to qualified institutional buyers and the offering is expected to close on June 14, 2021.
The company announced the pricing of $500 million of 6.125% Senior Secured Notes to acquire additional Bitcoin. According to Bloomberg, the firm received about $1.6 billion in orders for the offering, including interest from a large number of hedge funds.
MicroStrategy announces pricing of $500 Million of 6.125% Senior Secured Notes due 2028 to acquire additional #bitcoin. $MSTRhttps://t.co/qEhHtJS69Q
— Michael Saylor (@michael_saylor) June 8, 2021
MicroStrategy has already issued convertible bonds worth around $1 billion in its mission to scoop up more BTC. However, this is the first-ever corporate bond sale with proceeds earmarked for such purchases as Saylor continues on his quest to make it an official corporate strategy.
Still Bullish on Bitcoin
Junk bonds, or high-yield bonds, are those that carry a higher risk of default than most bonds issued by corporations and governments. A bond is a debt or promise to pay investors interest payments along with the return of invested principal in exchange for buying the bond.
MicroStrategy had initially planned to issue $400 million of the debt and had already seen that much in demand by the time the deal was launched on Monday so it sold the secured notes at a yield of 6.125%.
“The notes and the related guarantees will be secured, on a senior secured basis with MicroStrategy’s existing and future senior indebtedness, by security interests on substantially all of MicroStrategy’s and the guarantors’ assets, including any bitcoins or other digital assets acquired on or after the closing of the offering,”
Bloomberg reported that the company had amassed 92,079 BTC by mid-May, which it says were acquired for about $2.25 billion at an average of about $24,450 per token. MicroStrategy stated that this stash will be held by a newly formed subsidiary, MacroStrategy LLC.
According to BitcoinTreasuries, the firm is the top corporate holder of Bitcoin, and that investment is now worth $3 billion after making a gain of 33% to current prices.
High-Risk High Reward
There is a concern that selling corporate bonds to buy Bitcoin is akin to gambling but that is largely the nature of high-risk investments – which is what crypto assets are.
At the time of press, Bitcoin was trading at the same price it was at this time yesterday – $32,870. The asset has slid 10% since the beginning of the week over increased regulatory fears in the U.S.