MicroStrategy Inc. (NASDAQ: MSTR) has announced the pricing of its upsized $2.6 billion convertible senior notes offering. The company announced that the sale proceeds will be utilized to buy more Bitcoin (BTC). Hence, it marks a pivotal step in the company’s BTC acquisition spree after the latest $4.6 billion purchase.
A Look At MicroStrategy’s Convertible Notes Offering
The 0% notes, maturing in December 2029, will be sold in a private offering to qualified institutional buyers under Rule 144A of the Securities Act of 1933 and to non-U.S. persons in compliance with Regulation S. The offering was increased from the previously announced $1.75 billion.
Initial purchasers also have the option to buy an additional $400 million in notes within three days of issuance, potentially raising the total proceeds to $3 billion. “The offering is expected to close on November 21, 2024, subject to satisfaction of customary closing conditions,” the company stated.
The notes, senior unsecured obligations of MicroStrategy, will not bear regular interest or accrete in principal. Holders can convert the notes into cash, MicroStrategy’s Class A common stock, or a combination of both, at MicroStrategy’s discretion. Prior to June 2029, conversions are allowed only under certain conditions.
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The conversion rate is set at 1.4872 shares of Class A common stock per $1,000 in principal, equating to a conversion price of $672.40 per share. The company noted this represents “a premium of approximately 55% over the U.S. composite volume weighted average price of MicroStrategy’s class A common stock” on November 19, 2024.
Redemption terms allow MicroStrategy to redeem all or part of the notes for cash starting December 2026 if the stock price reaches at least 130% of the conversion price for a specific period. Additionally, noteholders can require MicroStrategy to repurchase notes in 2028 or in the event of a fundamental corporate change.
How Will the Sale Proceeds Be used?
The company expects net proceeds from the offering to reach approximately $2.58 billion, or up to $2.97 billion if the initial purchasers exercise their option in full. MicroStrategy revealed its intentions for the funds. It stated, “The net proceeds from the offering will be used to acquire additional bitcoin and for general corporate purposes.”
The notes are being offered exclusively through a private placement memorandum and will not be registered under the Securities Act or other jurisdictional securities laws. The company emphasized, “The notes and any such shares may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.”
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