MicroStrategy Adds $500 Million Investment After Bitcoin Falls 50%

Michael Saylor raised his huge bet on bitcoin at MicroStrategy, borrowing $500 million via junk bonds to put into the bitcoin asset allocation, $100 million more than expected.

MicroStrategy Adds 0 Million Investment After Bitcoin Falls 50%

As numerous news stories have reported, Michael Saylor’s MicroStrategy issued junk bonds.

MicroStrategy said it would borrow about $500 million in the form of secured notes. All of the money raised will be used to buy more bitcoin when the price of bitcoin, the flagship cryptocurrency, is more than 50% below its all-time high.

Saylor’s Virginia-based business software company announced Tuesday that it has sold $500 million in high-yield bonds with an annual interest rate of 6.125 percent and a maturity date of 2028, which are believed to be the first bonds directly related to the purchase of bitcoin.

The deal is worth more than the $400 million the company had hoped to raise. MicroStrategy received about $1.6 billion in orders, according to related data. A large number of hedge funds have expressed interest, Bloomberg said, citing people familiar with the matter.

MicroStrategy intends to use the net proceeds from the sale of these bonds to acquire more bitcoin, according to MicroStrategy’s report.

The business analytics software company added that it would borrow from “qualified institutional buyers” as well as from “people outside the U.S.”

Saylor is one of the most bullish advocates of bitcoin in the market, and MicroStrategy currently owns about 92,000 bitcoins, which were worth about $3.2 billion on Wednesday. Previously MicroStrategy has issued bonds to purchase this crypto asset.

The company expects that the latest bond issue will provide it with $488 million to buy more bitcoins.

However, given the extreme volatility of bitcoin, Saylor’s method of raising money through high-yield bonds to acquire more bitcoin carries some risk.

MicroStrategy announced on Tuesday that it expects to lose $284.5 million in the second quarter as the value of bitcoin has fallen 42 percent since the end of March.

On Tuesday, the market price of bitcoin was about $34,300, down more than 45 percent from its high of $65,000 in April. MicroStrategy’s shares fell sharply after Tesla CEO Elon Musk refused to continue accepting bitcoin as a payment method and after the Asian region tightened its grip on the market.

At the 2021 Bitcoin Conference in Miami earlier this month, Saylor’s discussion of Bitcoin’s return on investment made it possible to borrow and invest in Bitcoin.

“MicroStrategy realized that if crypto assets are growing 10% or more per year and you can borrow at 5% or 4% or 3% or 2%, then you should raise as much borrowing as you can and convert it into crypto assets.”

The MicroStrategy CEO also revealed that MicroStrategy’s investment in bitcoin has significantly improved the company’s financial performance.

“The reason we say Bitcoin is a hope is because Bitcoin fixes everything, including our stock of course, and that’s what happened, it energized the company and made morale much better and we just had our best first quarter in a decade.”

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/microstrategy-adds-500-million-investment-after-bitcoin-falls-50/
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