Convertible notes are bonds of credit that “convert” into shares of a company. MicroStrategy puts the destination of the price of its business shares in BTC.
Business intelligence company MicroStrategy wants to raise USD 400 million through the sale of convertible notes. With the net proceeds from this offering, they are seeking to buy more Bitcoin.
“MicroStrategy wishes to invest the net proceeds from the sale of the notes in Bitcoin, in accordance with the regulations of its Treasury, after meeting costs and other generic corporate expenses,” they state.
In recent days, they explained in a press release that the notes still do not have insurance to guarantee their value. They added that they will become shares of the company on December 15th, 2025. This will happen only if no one buys or exchanges them before, which will only be possible from 2023.
They will conduct the sale of notes discreetly, through a private memorandum to institutional investors registered in the United States.
Also, they inform that the notes will generate interest that buyers will receive on June 15th and December 15th, starting in 2021. They note that they will establish this interest rate, as well as the conversion rates and other terms, during the negotiation.
MicroStrategy thus shows its apparent long-term commitment to Bitcoin as an investment vehicle. A few days ago, MicroStrategy bought 2,574 BTC, equivalent to about USD 50 million, bringing its total investments to a total of 40,824 BTC.
Risky Bet on Bitcoin or Long-Term Security?
According to specialist Ellie Frost, “MicroStrategy is protecting its investments, although betting on Bitcoin carries its risks, due to the historical volatility of its price.”
She argues that MicroStrategy shares would appreciate in the financial market if Bitcoin rises in price. However, she says that the value of the shares investment of the firm could drop if the price of the pioneering cryptocurrency falls.
Despite this, Frost notes that MicroStrategy has continued to buy back its shares, in addition to not having many more financial responsibilities. In a way, that would guarantee it greater stability as a company in this context.
Besides, Frost states that the fact that they are notes convertible into shares of the company means that the interests that the holders receive are not high. For that reason, the company would further protect its overall finances.
MicroStrategy’s strategy is comparable to Tesla’s, given its insistence on doing multiple rounds of funding relying on its growth as a company, Frost says.
One of the crucial points in the company’s strategy seems to be precisely that of transmitting this security. This is true, especially when taking into account that Bitcoin has remained above USD 19,000, hovering around its all-time high in prices. This represents a risky investment amid the possibility of a market crash and a significant decrease in the price of the cryptocurrency.
By Alexander Salazar
