MicroStrategy to raise $400m to purchase additional Bitcoin

Business intelligence firm MicroStrategy announced on June 7th 2021 that it is borrowing $400 million to buy additional Bitcoin holdings. They intend to offer senior secured notes to qualified institutional buyers to raise funds and use the net proceeds to purchase Bitcoin.

This is now their third debt sale to raise funds to purchase additional Bitcoin. By selling notes, institutional investors can buy the debt from MicroStrategy with the promise of receiving back their principal and interest when the notes mature in 2028.

Their existing portfolio of approximately 92,079 BTC currently held in its treasury will also be held by a newly formed subsidiary named MacroStrategy LLC. This move is presumably to retain custodial control over their extensive holdings.

With the current price of Bitcoin of around $33,000, MicroStrategy could purchase an estimated further 12,000 Bitcoin, and take their Bitcoin holdings to over 100,000. According to recent filings, their average purchase price of Bitcoin remains around $25,000 per bitcoin as of May 18th.

MicroStrategy also said it expects to post a $284.5 million loss “based on fluctuations in the market price of bitcoin” during its next earnings report due at the end of Q2.

Michael Saylor, the CEO of MicroStrategy, has been leading the institutional wave of purchasing Bitcoin and has been an ardent supporter of bitcoin on Twitter, being one of the first to introduce “Laser-Eyes”, a light-hearted way to show your support for Bitcoin, to his profile picture.

He revealed he has been working on creating a Bitcoin-based podcast and also recently announced that board directors are to receive their board fees in Bitcoin, another sign that Saylor sees Bitcoin as an integral asset within MicroStrategy.

Regular purchases of Bitcoin have been made by MicroStrategy since the peak of $64,000, outlining their steadfastness and belief in the asset and its ability to be a hedge against both inflation and gold. The $400m debt sale follows MicroStrategy’s recent $1bn purchase of Bitcoin in February 2021 and their first $250 million purchase back in August of 2020.

Saylor also tweeted that entities he controls “have acquired over 111,000 Bitcoin” with no intention to sell any of his holdings. With a current value of over $3bn, these holdings signify that Saylor is making a considerable and sizeable bet on the success of Bitcoin

His continued commitment to purchasing Bitcoin over the previous 12 months has shown that leading Fortune 500 companies are starting to diversify their “capital allocation strategies” and consider Cryptocurrencies as a treasury or cash replacement asset.

The purchases of Bitcoin by MicroStrategy marked newfound confidence in alternative assets and spurred a wave of institutional buyers, including purchases from Tesla, Square, Grayscale and interest from global banking leaders like Morgan Stanley and Goldman Sachs.

Michael Saylor has often been well-spoken and convincing regarding his belief in Bitcoin and recently appeared as a headline guest at the recent Bitcoin 2021 conference in Miami to further outline his bullishness on the asset. In an interview, he said:

“When I discovered bitcoin I thought this is digital gold on a big tech monetary network and it’s going to grow by a factor of a hundred. Then I thought, well, I should buy as much as I can…I was buying it and I was thinking I have to buy as much as I can, as fast as I can or someone will figure this out and I won’t be able to.”

Saylor also addressed concerns surrounding ESG regulations and Bitcoins energy efficiency controversies. He said: “As I studied it, it became clear that it’s the highest value use of intermittent energy” and that Bitcoin is “the highest value use of renewable energy.” These comments come not too soon after Saylor and Elon Musk announced the Bitcoin Mining Council to help shape the narrative around the cryptocurrency’s energy use.

He worked with Musk and a collection of North American miners to create an organization that could publish energy usage data to address growing concerns that Bitcoin is not environmentally friendly.

Whilst bullish news continues to push forward the adoption of Bitcoin, including a handful of South-American countries planning to introduce Bitcoin as legal tender, the market has been marred by recent negative news.

Donald Trump referred to Bitcoin as a “scam against the dollar” and its use in the colonial pipeline attack have affected the price negatively, falling to recent lows of around $33,000. China also recently blocked prominent cryptocurrency influencers and accounts from Weibo, a leading microblogging site similar to Twitter.

It’s clear that Bitcoin needs a bullish catalyst, but it’s worth remembering that price action is temporary and that the fundamentals haven’t changed. Bitcoin and other cryptocurrencies look to be here to stay, and with support from Saylor and other so-called “Bitcoin Maxis”, the road to redemption looms large from the cryptocurrency industry.

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