MicroStrategy issues another $500 million convertible bond, Bitcoin unrealized profit of $8.1 billion, stock performance surpasses NVIDIA

The Bitcoin development company MicroStrategy has announced that it will issue an additional $500 million in convertible senior notes to purchase more Bitcoin for general corporate purposes. MicroStrategy, holding 205,000 Bitcoins, has unrealized gains of up to $8.1 billion. The recent stock price has significantly outperformed Bitcoin, closing at $1,766 yesterday.

MicroStrategy to Issue Another $500 Million in Convertible Notes

MicroStrategy has announced that it will issue $500 million in aggregate principal amount of 2031 convertible senior notes due on March 15, 2031, in a private offering to qualified institutional buyers. The proposed terms of the offering are as follows:

• Maturity Date: March 15, 2031
• Interest Payment: Semi-annually on March 15 and September 15 each year
• Conversion: Convertible into cash, MicroStrategy Class A common stock, or a combination thereof under certain events and during specified periods

The interest rate, conversion rate, conversion price, and other terms of the notes will be determined at the time of pricing. MicroStrategy intends to use the net proceeds from the sale of the notes to purchase additional bitcoins for general corporate purposes.

MicroStrategy's Convertible Notes Reach $2.9 Billion

MicroStrategy has recently issued two batches of convertible senior notes this month. If this latest issuance is successful, MicroStrategy will have a total of four convertible notes with an aggregate principal amount of $2.9 billion, all carrying a nominal interest rate of less than 1%. The other three notes have already reached their conversion prices, but the conversion of these notes into common stock cannot be determined due to conversion period restrictions.

What is the operating principle behind MicroStrategy issuing convertible notes with low interest rates and high conversion prices?

MicroStrategy Stock Outperforms Bitcoin Recently

Since September 2020 when MicroStrategy began purchasing bitcoins, the comparison between MicroStrategy's stock price and the price of bitcoin is shown in the chart below. While the stock price has been highly correlated with the price of bitcoin, the recent performance of MicroStrategy's stock has significantly outperformed bitcoin. Since its bitcoin purchases, the stock price has risen by 380%, compared to bitcoin's 121% increase during the same period.

MicroStrategy's year-to-date gain of 155% has even surpassed the 84% gain of the AI giant NVIDIA.

Continued Bitcoin Accumulation Results in $8.1 Billion Unrealized Gains

Although bitcoin has been hitting new highs recently, investors are curious about when MicroStrategy will sell bitcoin to realize profits. However, the company's CEO Michael Saylor has stated that "continuing to buy bitcoin is a form of exit strategy." Saylor also initiated a daily stock selling plan earlier this year to fund bitcoin purchases.

Currently holding 205,000 bitcoins at an average cost of $33,706, MicroStrategy would realize unrealized gains of $8.1 billion based on today's price of $73,220.

MicroStrategy's CEO Michael Saylor has initiated a daily stock selling plan to fund bitcoin purchases.