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Ruholamin Haqshanas
Author
Ruholamin Haqshanas
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MicroStrategy (MSTR) shares surged 13% on Monday, reaching a record closing high after the company revealed it had acquired $4.6 billion worth of Bitcoin.
The firm also announced plans to raise an additional $1.75 billion through convertible notes to increase its cryptocurrency holdings.
The company’s stock performance has been remarkable, with over a 500% surge in 2024, far outpacing major stocks like Microsoft, which gained just 11% this year.
The exceptional growth reflects the success of MicroStrategy’s aggressive Bitcoin investment strategy under co-founder and executive chairman Michael Saylor.
MicroStrategy Holds 331,200 BTC
Michael Saylor, co-founder and chairman of MicroStrategy, shifted the company’s focus to Bitcoin in 2020 as a hedge against inflation.
Initially using cash, the company has moved to leveraging capital raised through stock issuance and convertible bonds.
As of now, MicroStrategy holds 331,200 BTC, purchased at an average price of $88,627.
The current value of its Bitcoin stash places the company in a strong position, boasting an estimated $13.7 billion in unrealized profits.
To fund its Bitcoin acquisitions, MicroStrategy plans to issue senior convertible notes with a 0% interest rate, maturing in December 2029.
These notes offer investors the option to convert debt into equity, a strategy the company has employed in previous fundraises, such as an $875 million issuance in September 2024 and another in June.
The convertible note strategy allows MicroStrategy to secure low-interest or interest-free capital, which is then channeled into Bitcoin purchases.
Investors find the conversion feature appealing, particularly with the company’s impressive stock performance.
Those holding the notes can benefit from stock appreciation or choose to reclaim their principal upon maturity.
However, MicroStrategy’s strategy is not without risks. Bitcoin’s notorious volatility poses a significant threat.
A sharp decline in Bitcoin’s value could undermine the company’s financial stability and erode its profits.
More Firms Adopt Bitcoin as Reserve Asset
The ongoing macroeconomic uncertainties, characterized by increasing inflationary pressures and geopolitical tensions, have prompted corporate treasurers to explore the inclusion of Bitcoin as a reserve asset.
Just recently, digital asset prime services platform Abra launched a service designed for corporates seeking to hold cryptocurrencies as reserve assets on their balance sheets.
Likewise, Japanese investment firm Metaplanet has been actively increasing its bitcoin holdings since May, when it announced plans to use Bitcoin as a strategic treasury reserve.
The move was driven by Japan’s economic challenges, including high government debt, negative interest rates, and a weakening yen.
In addition to its Bitcoin purchase, Metaplanet revealed it will exercise stock acquisition rights, generating 299.7 million yen to fund further bitcoin acquisitions.
The firm also announced a partnership with SBI VC Trade, the crypto subsidiary of SBI Group, to access corporate custody services that optimize tax efficiency and provide potential financing options using bitcoin as collateral.
Last month, the firm raised approximately 10 billion yen ($66 million) through a stock acquisition rights offering, attracting 13,774 individual shareholders.
