Crypto: MicroStrategy Offers More Junk Bonds To Buy BTC

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There’s been one company at the forefront of promoting bitcoin use in the corporate world – MicroStrategy. It’s bought a few billion dollars worth of bitcoin, financed by its own cash flow as well as borrowings on the bond market.

  • Now, MicroStrategy is back again on the bond market to raise cash to buy bitcoin. This is despite its own indication of expecting to report an impairment loss of $285mn in its next earnings report due to fluctuation in the price of bitcoin that it holds.
  • MicroStrategy is selling $500mn worth of high-yield bonds, fondly called junk bonds, to buy bitcoin. The bonds are senior notes due by 2028, with an annual interest of 6.125%.
  • MicroStrategy apparently is dazzled with bitcoin, such that after selling $1.6bn worth of bonds last year to buy it, it’s back on the block to sell $500mn more. In fact, it originally planned to sell $400mn but topped $100mn more at the last minute.
  • Buying bitcoin is how MicroStrategy has drawn the attention of many investors after revenue from its main business stalled for a decade. The company, which sells software for business intelligence, had $480mn in revenue in 2020, barely up from $455mn in 2010.
  • The attention it’s gotten has favored MicroStrategy stock, which has risen from around $120 in June 2020 to a peak of $1,100 this February and now at $460.
  • As with bitcoin and its high volatility, the value of MicroStrategy’s holdings has seen massive swings this year. Though, the company still comes out on top even as bitcoin has dropped recently to $35k, given that it acquired them at an average price of $24,450, per company filings.
  • MicroStrategy’s stern attachment to bitcoin is the work of its longtime CEO Michael Saylor, who himself is a major holder of the cryptocurrency to the tune of a $2bn fortune (Forbes estimate). For the company, it holds 92k bitcoins worth over $3bn at current prices.

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