Microstrategy's $875M Senior Convertible Notes Offering

MicroStrategy has announced the issuance of $875 million in principal amount of convertible senior notes due 2028, with an interest rate of 0.625%. The offering is expected to close on September 19, 2024. The remaining funds will be used to buy Bitcoin.

MicroStrategy plan for convertible senior notes

According to MicroStrategy’s report, the notes will be sold in a private offering to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”).

The corporation provided an option to buy up to an additional $135 million in notes. The notes mature on September 15, 2028, with an initial conversion rate of 5.4589 shares per $1,000 principal amount, resulting in a conversion price of $183.19 per share. Previously, the business planned to offer $700 million.

The notes will represent MicroStrategy’s unsecured senior obligations, bearing interest at a rate of 0.625% per annum, due semi-annually in arrears on March 15 and September 15 of each year, beginning March 15, 2025.

Holders of notes can require MicroStrategy to repurchase their notes on September 15, 2027, or upon the occurrence of certain events that constitute a fundamental change under the notes’ indenture at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the date of repurchase.

The notes’ conversion rate will be 5.4589 shares of MicroStrategy class A common stock per $1,000 principal amount of notes, resulting in an initial conversion price of approximately $183.19 per share.

The initial conversion price of the notes is about 40% more than the U.S. composite volume weighted average price of MicroStrategy’s class A common stock from 1:00 to 4:00 p.m. Eastern Daylight Time on September 17, 2024, which was $130.8477. The conversion rate will be adjusted in response to certain market events.

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