MicroStrategy Acquires $101 Million in Bitcoin to Boost Holdings
MicroStrategy, an enterprise software company transformed into a Bitcoin (BTC) investment platform, made headlines with a recent purchase of $101 million in BTC.
Led by chairman and co-founder Michael Saylor, the company uses perpetual preferred stock, common shares, and debt to support its Bitcoin acquisition strategy.
MicroStrategy Eyes $42 Billion Capital Raise By 2027
In a filing with the US Securities and Exchange Commission (SEC), MicroStrategy revealed it purchased 1,070 Bitcoin tokens at an average price of approximately $94,000 on December 30 and 31, 2024. This increases the company's total holdings to 447,470 BTC, acquired for around $27.97 billion at an average price of $62,503 per Bitcoin. Saylor noted a Bitcoin yield of 48% for Q4 2024 and 74.3% for the fiscal year in a social media post.
MicroStrategy plans to raise up to $2 billion through offerings of perpetual preferred stock, which will have seniority over Class A common stock. This is part of a broader goal to raise $42 billion by 2027 through various means, including stock sales and convertible debt offerings. With over two-thirds of its equity goals met, the company may shift focus to fixed-income markets soon.
The demand for MicroStrategy's stock (MSTR) has risen among hedge funds utilizing convertible arbitrage strategies involving bond purchases and short-selling shares, benefiting from the stock's volatility. Benchmark analyst Mark Palmer commented on this volatility as a key element that allows easier access to capital markets.
Recent proposals to increase authorized shares of Class A common stock from 330 million to 10.3 billion raised concerns about share dilution, resulting in a notable drop in stock price.
MicroStrategy’s Bold Bitcoin Strategy Faces Headwinds
On the day of the proxy filing in December, shares fell by 9.6%. Adam Kobeissi, founder of The Kobeissi Letter, described the situation as a dilemma for investors, stating:
It’s a lose-lose because on one hand you have people saying that it’s dilutive and they’re selling the stock… but on the other hand you have people saying if it doesn’t pass, then they can’t keep buying Bitcoin and the whole investment strategy is kind of broken.
A vote on the share increase is scheduled for January 21, 2025, with Saylor being a significant shareholder, making approval likely. If approved, the increase could lead to further volatility as the company becomes more leveraged.
While MicroStrategy has historically outperformed Bitcoin, it has faced challenges recently, indicating performance is influenced by factors beyond cryptocurrency prices.
Despite fluctuations, Palmer maintains a "buy" rating on MicroStrategy's stock, asserting the market's reaction to the proposed share increase has been excessive. He stated, “The company’s strategy has been to issue shares to make accretive Bitcoin purchases which can accrue to the benefit of shareholders.”
MicroStrategy's aggressive Bitcoin acquisition strategy led to significant purchases exceeding $1 billion in late 2024, though recent weeks show a slowdown amid fluctuating Bitcoin prices. Palmer reassured investors that this is not indicative of a slowdown but reflects the company's aggressive approach.
At the time of writing, Bitcoin trades near the $100,000 milestone at $99,340, up 2% in the last 24 hours.
Featured image from DALL-E, chart from TradingView.com.