Last December, MicroStrategy issued $650 million in bonds to buy bitcoins. Now the company’s management wants to repeat the step, only securities will be issued for $400 million.
June 8, 2021 | AtoZ Markets – Analytical software provider MicroStrategy (MSTR) announced on Monday its plans to raise $400 million through a covered bond offering. All this to buy more Bitcoins (BTC).
The Virginia-based company already owns 92,079 BTC, which will be held in a newly formed entity called MicroStrategy LLC. The announcement also included the launch of another entity called Micro Strategy Services Corporation. Funds will be raised through a covered bond offering totaling $400 million. The maturity date is 2028.
The announcement stipulated that the offer is subject to market conditions and it is uncertain whether and when its terms can be met. The bonds sold will be “fully and unconditionally guaranteed by MicroStrategy Services Corporation on an overriding collateral basis,” the release reads.
The bonds will only be available to qualified institutional buyers “in accordance with Rule 114A of the Securities Act of 1933,” reports MicroStrategy. This also applies to non-US individuals who comply with Regulation S of that act.
As for collateral, to stay safe, the bonds will use existing MicroStrategy assets. This does not include MicroStrategy’s current interest in Bitcoin.
MicroStrategy continues to make bullish investments in Bitcoin
Since the new year, the company has made no fewer than six major purchases , bringing its total BTC ownership to nearly $3.4 billion. MicroStrategy purchased 20,857 Bitcoins in the first quarter of 2021, with an average purchase price of $52,087 per coin, or approximately $1.086 billion in total.
According to Michael Saylor, CEO of MicroStrategy:
We will continue to purchase and hold additional bitcoins as we strive to create additional shareholder value.
The company’s last purchases were made on May 18, when it bought 229 BTC for approximately $10 million. MicroStrategy’s initial purchase of BTC took place on August 11, 2020, and the coin price has risen by 430% since then.
Some people, such as the chief income strategist of the Oxford Club, Marc Lichtenfeld, criticize MicroStrategy’s business model of buying Bitcoin. They even suggest that this is not a business at all, but only an intermediary buying Bitcoin with other people’s money.
In a series of tweets, Lichtenfeld gave his opinion by saying:
Think about it for a moment. $MSTR does not borrow $400 million to expand its business. This is a loan to play on floating assets. Would it be okay to borrow money to buy $AMC? thief? Baseball cards?
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