MicroStrategy, one of the world’s largest and most avid bitcoin holders, is completing a $400 million debt offering while planning a $1 billion increase, mainly to buy more coins!
As previously mentioned by Wall Street Insight, Bitcoin unexpectedly surged yesterday, returning to $40,000. It is widely believed that a tweet from Musk “lit the fire” again.
Is Musk really the only driver?
A company that used to specialize in business intelligence and now owns $4.6 billion worth of bitcoin is planning to make a big bet on bitcoin.
According to public sources, the company, called MicroStrategy, has previously held 92,079 bitcoins indirectly through a subsidiary. It is the largest holder of bitcoin, except for the Grayscale Fund, which holds bitcoin for its clients through GBTC (Bitcoin Investment Trust).
Raising Bets Like Crazy
On Monday, MicroStrategy announced that its investment in bitcoin will increase from $400 million to $488 million, an increase of more than 20%.
The investment money was primarily raised from a debt offering earlier this month, which was originally aimed at investing in bitcoin.
In addition, MicroStrategy was allowed to sell up to $10 worth of Class A common stock, according to its S-3 filing with the Securities and Exchange Commission on Monday, which the company said it intends to use the proceeds “for general corporate purposes, including the purchase of bitcoin.
This isn’t MicroStrategy’s first big gamble, as the company’s bitcoin bets since last August could almost be described as crazy.
On August 11, 2020, MicroStrategy first publicly stated that it used the company’s own funds to purchase bitcoin, and has since made four additional investments, purchasing a total of 41,433 bitcoins at an average position cost of $11,947.
After tasting the high returns of coin speculation, MicroStrategy issued a total of $1.7 billion in convertible debt financing on Dec. 20 last year and Feb. 24 this year, purchasing 48,868 bitcoins at an average position cost of $34,788.
Taken together, MicroStrategy’s previous average bitcoin position cost $24,450, using a total of $2.2 billion in funds, of which only $500 million was its own, and $1.7 billion in debt financing, amounting to 3.4 times the former.
The Gambler’s Logic
In contrast to Musk’s repeated horizontal jumps in his attitude towards Bitcoin, MicroStrategy’s CEO, Michael Saylor, has a firm stance and is one of the most loyal long Bitcoin investors. He promised during Bitcoin’s turbulent May market that he would not sell any of his Bitcoin holdings.
Previously, he also repeated “we’re not selling” and “damn Musk” several times in front of the entire audience at the Bitcoin 2021 conference, using profanity.
However, this big bet on bitcoin is also a risky one.
According to MicroStrategy’s balance sheet for the first quarter, it had net assets of $365 million and total liabilities of $2.078 billion as of March 31.
Because of its huge exposure to bitcoin, the company could become insolvent if it is allowed to continue to fall.
For this reason, MicroStrategy has chosen to continue to increase its bitcoin holdings, which is its optimal strategy at this time.
In addition, MicroStrategy holds so much bitcoin assets that its original primary business has little impact on its overall earnings, and the company’s stock price fluctuates with the dramatic fluctuations in bitcoin prices.
As of the close of the last trading session, MicroStrategy shares were up 387% in the last year and were up 1.09% yesterday at $598.49, with a total market cap of $5.883 billion.
As of this writing, bitcoin is slightly above $40,000, down more than 37% from its all-time high of $64,000 in April of this year. However, it is still up 25% compared to its $32,000 price at the beginning of the year.
Note: This article does not constitute any investment advice. Cryptocurrencies are soaring and plunging, so please invest rationally and be aware of the risks.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/bitcoin-back-to-40000-and-the-gamblers-doubling-down-mode/
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