- MicroStrategy completed a $1.01 billion upsized offering of convertible senior notes on September 19.
- The notes, maturing in 2028 with a 0.625% coupon rate, feature a 40% conversion premium.
- Proceeds will be used to redeem $500 million in existing notes and buy more Bitcoin.
On September 19, MicroStrategy wrapped up a significant financial maneuver by finalizing an upsized offering of convertible senior notes worth $1.01 billion. This substantial deal, enhanced by an option to purchase additional notes, saw an extra $135 million in notes issued. The offering was conducted privately, targeting institutional buyers under Rule 144A of the Securities Act of 1933.
MicroStrategy’s Convertible Notes Details and Conversion Premium
As per the September 20th press release, the newly issued notes, bearing a low coupon rate of 0.625%, are set to mature on September 15, 2028. They are unsecured and will accrue interest semi-annually, starting from March 15, 2025. These notes come with a notable conversion premium of 40% over MicroStrategy’s class A common stock price, currently set at an initial conversion price of approximately $183.19 per share. The conversion rate allows holders to convert their notes into a mix of cash and MicroStrategy shares, depending on the company’s election.
MicroStrategy has outlined specific conditions under which it can redeem these notes before maturity. Notably, the notes could be redeemed at face value plus accrued interest if the company’s stock price exceeds 130% of the conversion price. However, if only a portion of the notes are redeemed, a minimum of $75 million in notes must remain outstanding.
Investors can request repurchase of their notes on September 15, 2027, or upon the occurrence of a fundamental change, at the principal amount plus any accrued interest. Additionally, should MicroStrategy execute a corporate event or call any notes for redemption, it might have to adjust the conversion rate to benefit those converting their notes.
The proceeds from this note issuance, approximately $997.4 million after expenses, will primarily be used to redeem MicroStrategy’s existing $500 million 6.125% Senior Secured Notes due 2028. The company also plans to allocate the remaining funds to purchase more Bitcoin and for other corporate needs. The redemption of the Senior Secured Notes, scheduled for September 26, 2024, will release about 69,080 bitcoins currently securing these notes.
This move underscores MicroStrategy’s ongoing strategy to manage its debt more effectively while bolstering its cryptocurrency holdings. The offering, conducted under Rule 144A, ensures the notes and potential shares from conversions are restricted from public trading without proper registration.
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