MicroStrategy Wants to Offer $400 Million in Convertible Notes to Buy More Bitcoin

MicroStrategy is hodling A LOT of Bitcoin, and it’s coming for more. The corporation just revealed that it’s looking for financing to acquire an additional stash of Bitcoin.

The company shared the information in an official announcement on its website on December 7, 2020. According to the Press Release, MicroStrategy would be contemplating a $400 million private offering in convertible senior notes, with the idea of increasing its Bitcoin reserves:

MicroStrategy intends to invest the net proceeds from the sale of the notes in bitcoin in accordance with its Treasury Reserve Policy pending the identification of working capital needs and other general corporate purposes.

MicroStrategy is Looking For Ways to Get More Bitcoin

Convertible notes are promissory notes that, besides representing debt, can be used for additional purposes like investments, purchases, and trades. The difference between convertible notes and vanilla promissory notes is that holders can receive additional benefits such as an interest rate and the pledge of underlying security (if applicable)

MicroStrategy’s notes will mature in December 2025, and the company will be able to buy out the notes in cash in December 2023. Noteholders will receive interest twice a year, on June 15 and December 15 of each year, beginning on June 15, 2021.

The announcement comes just two days after MicroStrategy purchased $50 million in Bitcoin at a price of approximately $19,427 per token, for a total of 2574 BTC. Furthermore, this announcement follows two purchases of almost $500 million a few months earlier.

The company currently has 40,824 bitcoins under management. To put things in context, that amount represents almost 0.2% of all bitcoins ever to exist, 0.22% of the total bitcoin in circulation today, and nearly 0.3% of the total bitcoins available – excluding those that are forever lost according to estimates by Unchained Capital in 2018.

How Long Can the “MicroStrategy Effect” Last?

Although risky, the move would represent a strong endorsement of Bitcoin’s nature as a profitable investment. MicroStrategy’s decisions have raised its value by almost 100%, causing a similar effect on Bitcoin’s price.

But how long can this symbiosis last? A crash like the one that occurred in 2018 could bring severe problems to the company if it happens at any time during the next 5 years. However, for now, the markets are taking things with optimism. The Crypto Fear & Greed index is at an all-time high since its launch, with investors being 95% greedy, showing that for now, even though BTC is close to its ATH, investors are in a strongly bullish mood.

Michael Saylor, CEO of MicroStrategy, shared the announcement on its social media, and Crypto Twitter hold to reply. The memes, funny tweets and expressions of surprise quickly flooded Saylor’s timeline.

And there’s a reason for such enthusiasm: many crypto influencers argue that institutional investments are a key factor towards global crypto adoption… and valuation.