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MicroStrategy has announced a convertible senior notes offering worth $875 million. The company had initially planned to sell $700 million, but increased the offering due to high demand. The notes will mature in 2028 with a 0.625% interest rate, paid semi-annually.
Offering Details and How the Money Will Be Used
The convertible senior notes will be sold to institutional investors under Rule 144A of the Securities Act. These notes are unsecured, senior obligations of MicroStrategy that can be converted into cash, class A common stock, or a combination of both. The net proceeds are expected to be $864.1 million, with a potential maximum of $997.4 million if the full option is exercised.
Some of the funds will be used to pay off $500 million of the company’s 6.125% Senior Secured Notes due in 2028. The remaining funds will be used to purchase more Bitcoins and for other company needs.
Read also: MicroStrategy’s Bitcoin Bet Continues: $700M Debt Offering for More BTC
On September 16, 2024, MicroStrategy issued a redemption notice for the Senior Secured Notes, with redemption set for September 26, 2024. This is because upon redemption, approximately 69,080 Bitcoins pledged as collateral will be released.
Convertible Notes Terms and Redemption Rights
These new notes can be exchanged for shares of MicroStrategy’s class A common stock at an initial conversion rate of 5.4589 shares per $1,000 principal amount. This translates to a conversion price of about $183.19 per share, a 40% premium over the average price of the company’s shares as of September 17, 2024.
Starting from December 20, 2027, MicroStrategy has the option to pay off the notes with cash redemptions, if the company’s stock price reaches 130% of the conversion price. The notes’ holders can also demand their redemption by MicroStrategy under certain conditions, specifically in September 2027.
The offering is expected to close on or before September 19th, 2024, pending the fulfillment of all closing conditions. As MicroStrategy plans to continue its Bitcoin-focused approach, this new round of fundraising demonstrates the company’s commitment to buying Bitcoin as part of its business operations.
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