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MicroStrategy Prices $700 Million Convertible Senior Notes Offering

Highlights:

  • MicroStrategy offers $700 million in 2.25% convertible senior notes due 2032 in a private sale.
  • Notes are convertible into cash, MicroStrategy stock, or a combination at MicroStrategy’s discretion.
  • Recently, MicroStrategy issued a notice to redeem $650M of 2025 convertible notes, settling all conversions in shares.

MicroStrategy has announced the pricing of its $700 million convertible senior notes offering. These notes, bearing an interest rate of 2.25% per annum, will mature in 2032. Initially planned at $500 million, the company increased the offering to meet investor demand. Qualified institutional buyers will purchase the notes under Rule 144A of the Securities Act of 1933.

Details of the Offering

MicroStrategy has also granted initial purchasers an option to buy up to an additional $100 million in notes within a 13-day period from the initial issuance date. The company expects to close the offering on June 17, 2024, contingent on customary closing conditions.

The notes are unsecured senior obligations of MicroStrategy and will pay interest semi-annually on June 15 and December 15, starting December 15, 2024. The company may redeem the notes for cash on or after June 20, 2029, under specific conditions, provided the company’s Class A common stock reaches at least 130% of the conversion price.

Holders can require MicroStrategy to repurchase the notes on June 15, 2029, or upon certain events constituting a fundamental change. The company will repurchase the notes at 100% of the principal amount plus accrued interest. Additionally, if certain corporate events occur or if the company calls any notes for redemption, MicroStrategy must increase the conversion rate for holders who opt to convert their notes.

Conversion and Use of Proceeds

The notes are convertible into cash, shares of MicroStrategy’s Class A common stock, or a combination at MicroStrategy’s discretion. Before December 15, 2031, holders may convert the notes only under certain conditions and during specific periods; after that, they can convert the notes up until the second trading day before maturity.

The company sets the initial conversion rate at 0.4894 shares per $1,000 principal amount of notes, equivalent to an initial conversion price of about $2,043.32 per share. This represents a 35% premium over the U.S. composite volume-weighted average price of MicroStrategy’s Class A common stock on June 13, 2024, which was $1,513.46. The conversion rate will adjust depending on specific events.

MicroStrategy estimates net proceeds from the sale to be approximately $687.8 million, potentially rising to $786.0 million if the additional notes option is fully exercised. The company plans to use these proceeds to acquire more Bitcoin for general corporate purposes.

Qualified institutional buyers can purchase the notes under Rule 144A of the Securities Act. They and the shares are issuable upon conversion and not registered under the Securities Act or state securities laws. Thus, sellers can only offer them in the U.S. with registration or an exemption. A private offering memorandum makes the offering exclusively.

MicroStrategy to Redeem $650M Convertible Notes in Shares

Earlier, MicroStrategy revealed its plan to redeem its outstanding 0.750% Convertible Senior Notes due 2025, totaling $650 million. The company has set the redemption date for July 15, 2024, and the redemption price will be 100% of the principal amount plus accrued interest up to that date.

Holders can convert their notes into shares of MicroStrategy’s class A common stock at a conversion rate of 2.5126 shares per $1,000 principal amount before July 11, 2024. The company will fulfill conversion requests solely in shares, with cash provided for any fractional shares. The notice sent to note-holders contains full details.

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