According to MicroStrategy documents on Monday filed with the Securities and Exchange Commission (SEC) revealed that the company in October and November 7002 to buy bitcoins for $ 414 million, each costing an average Bitcoin price of $ 59,187. After completing this “purchase”, the total number of Bitcoins held by MicroStrategy has exceeded 120,000.
According to statistics from Ouke Cloud Chain Masters, as of December 3, 2021, MicroStrategy holds a total of 121,000 Bitcoins, with a total value of US$6.841 billion (calculated based on the real-time value at the time of writing) and a total cost of US$3.6 billion. , The comprehensive cost of each bitcoin is about 29,500 U.S. dollars, the current floating profit of the position is 3.241 billion U.S. dollars, and the rate of return is 90%.
The company’s position of Bitcoin (partial), data source Ouke cloud chain master
Among all the companies that hold Bitcoin positions, MicroStrategy ranks third in terms of the number of positions and the value of positions. If you look at the ranking of listed companies alone, MicroStrategy surpasses Tesla, Galaxy Digital Holdings, and Voyager Digital. The holdings of many well-known listed companies, such as LTD, Square, Inc, Coinbase Global, Inc, etc., made it to the top of the list, even exceeding the total holdings of all subsequently listed companies.
“Shadow stocks”: the inextricable bond between MicroStrategy and Bitcoin
Although most investors in the crypto market have only one or two years of understanding of MicroStrategy, the development process of MicroStrategy has exceeded 30 years. In November 1989, MicroStrategy was established in Tysons Corner, Virginia, USA. It is an enterprise that provides business intelligence, data analysis, mobile software development, and cloud computing. In the 30 years since its establishment, MicroStrategy has always adhered to its leadership. In terms of business, it has not been reported that it has any intersection with encrypted assets. Even the company’s CEO Michael Saylor (Michael Saylor) once criticized Bitcoin on social platforms in 2013, saying that Bitcoin’s days are not good. countable.
Michael Saylor questioned Bitcoin in 2013, the image source network
However, with the arrival of the bull market in the crypto market in 2020 and the increasing risk of uncertainty in the global economic environment, Michael Saylor and MicroStrategy under his leadership did not escape the “law of true fragrance” in the end. On August 11, 2020, MicroStrategy suddenly announced that it had bought $250 million worth of Bitcoin, and thus became the world’s first public company to publicly allocate Bitcoin as an asset. In this regard, MicroStrategy gave the following reasons: the depreciation of the U.S. dollar, the decline in cash returns, the impact of the new crown epidemic, and other macro-environmental impacts prompted the company to seek more diversified assets allocation plans. Looking back at the historical market, we can find that the Bitcoin price at that time was only around $11,000. From the perspective of later comers, it can be described as accurate bottom hunting.
Soon after MicroStrategy announced the purchase of the first batch of Bitcoin, Bitcoin started a significant upswing, from around USD 11,000 in August 2020 to USD 64,846.9 on April 14, 2021. Platform market data), but since then started a five-month volatile downward trend. During this period, MicroStrategy continued to raise Bitcoin.
As of the close of Nasdaq on December 2, 2021, MicroStrategy’s total market value is 7.08 billion U.S. dollars, and the value of its bitcoin holdings is 6.841 billion U.S. dollars, which means that the total value of its bitcoin holdings has reached the company 96.62% of the total market value, compared with 71.76% in June this year, an increase of nearly 25%. Such a high proportion means that Bitcoin’s rise and fall will directly affect MicroStrategy’s stock price, and its trend is closely related to the ups and downs of the crypto market. It is precise because of this that MicroStrategy’s stock has also won the title of Bitcoin “shadow stock”.
Multiple bond issuances to raise funds to increase Bitcoin
MicroStrategy has a record of borrowing to buy Bitcoin. As early as December 11, 2020, and February 19, 2021, MicroStrategy issued two notes, raising a total of 1.7 billion US dollars in funds, and will raise money. All funds are invested in Bitcoin. The most noteworthy thing is that MicroStrategy’s two bond issuances cleverly used “convertible notes” as a financial tool to obtain funds from the traditional market with an almost negligible cost. For betting on Bitcoin with high volatility, from the current results, it is clear that MicroStrategy is betting in the right direction.
On December 11, 2020, MicroStrategy announced that it has completed the issuance of senior unsecured convertible notes (Senior Unsecured Convertible Notes) worth US$650 million. According to the Business Wire website, the annual interest rate of the convertible notes is 0.750%. In 2021 Interest will be paid semiannually starting from June 15th, that is, interest will be paid once every year on June 15th and December 15th. The bill initially planned to raise US$400 million, but in the end, the excess funds raised reached US$650 million, which to a certain extent reflected the attitude of the capital market to the digital asset industry at that time. It is understood that the expiry date of this note is December 15, 2025. After expiration, investors can choose to convert the note into cash or MicroStrategy Class A common stock, or a combination of the two. The agreed initial conversion ratio is 2.5126 MicroStrategy Class A stocks for the principal of the $1,000 note, which means that the investor buys its shares for $397.99, and MicroStrategy’s closing price on December 8, 2020, is calculated at $289.45. The premium is about 37.50%, but if the latest closing price of MicroStrategy stock is calculated at $683.36, then the current floating profit of the creditors of MicroStrategy’s financing has exceeded 130%.
On February 19, 2021, MicroStrategy once again completed the issuance of a $1.05 billion senior unsecured convertible note with a maturity date of February 15, 2027. The convertible note also allows investors to choose to convert it into cash, MicroStrategy Class A stock, or a combination of the two after maturity.
The initial conversion rate of the convertible note is 0.6981 MicroStrategy Class A shares for every US$1,000 note, which is equivalent to an initial conversion price of US$1,432.46 per share. Compared with the closing price of US$955.00 on February 16, 2021, a premium of approximately Is 50.00%. In addition to the premium rate that shows that investors are enthusiastic about this round of financing, the interest paid by MicroStrategy’s convertible notes can also be seen. The previous round was still 0.750%, and this round is direct with zero interest (the annual interest rate is 0%), and you only need to repay the principal after maturity. To be precise, this is not a regular zero-coupon bill. Zero-coupon bills are generally issued at a discount, while MicroStrategy is issued based on the face price. For these two debts worth up to $1.7 billion, MicroStrategy has to bear only $24.375 million in interest. From the point of view of the floating profit of MicroStrategy’s current Bitcoin holdings mentioned in the previous article, although it is less than a year since the completion of the first financing, the book income has already been more than ten times the interest it should pay, and Taking into account the impact of “shadow stocks”, the rise in the price of Bitcoin in the past two months has not only made MicroStrategy a fortune in the crypto market but also increased its stock price. Compared with the low price in June this year, At present, MicroStrategy’s stock price has gained a 48.16% increase.
MicroStrategy’s last financing to buy Bitcoin occurred on June 7th of this year. In a report submitted by MicroStrategy to the U.S. Securities and Exchange Commission (SEC), it was mentioned that the company expects at least $284.5 million in impairment losses on Bitcoin investments in the second quarter. But then it was announced that it would issue Senior Secured Notes (Senior Secured Notes) worth 400 million U.S. dollars (later increased to 500 million U.S. dollars) to purchase Bitcoin at an annual interest rate of 6.125%, which will expire in 2028. However, since the entire crypto market was still immersed in panic since the 5.19 decline, the crowd who was optimistic about the news in the capital market was not as good as the previous two financings.
The opposition believes that MicroStrategy’s Bitcoin position is already too large, and it can even be regarded as the company’s main business. If the price of Bitcoin continues to fall, this aggressive method of increasing positions may make MicroStrategy insolvent. Once it reaches this point, the huge bitcoin position it holds may become a bomb that will be thrown into the market at any time. Citibank even adjusted its rating to sell after MicroStrategy first claimed to issue convertible bonds for the purchase of bitcoins, and HSBC prohibited customers from buying MicroStrategy stocks. Fortunately, MicroStrategy once again bet on the right direction.
Michael Saylor’s evaluation of Bitcoin, information source hope.com
MicroStrategy CEO Michael Saylor has also changed his negative view of Bitcoin. He wrote in a prominent position on the homepage of the propaganda website operated by him: “Bitcoin is like a bank in cyberspace, through fair and credible rules. Run to provide global, affordable, simple and safe savings account for billions of people who have no choice or do not want to run their hedge funds.”-Michael Saylor.
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