MicroStrategy ( MSTR) announced Monday its plans to raise $400 using debt offering in order to purchase more bitcoin (BTC).
The Virginia-based company already owns 92,079 BTC, which will be held in a newly-created entity called MicroStrategy LLC. The announcement also included the launch of another entity called Micro Strategy Services Corporation. The funds will be raised by offering $400 million aggregate principal amount of senior secured notes due by 2028.
The release stipulates the offering is subject to market conditions and makes no assurances if or when the terms of the offering may be completed. The notes sold will be “fully and unconditionally guaranteed on a senior secured basis, jointly and severally, by MicroStrategy Services Corporation,” according to the release.
The notes will be available only to qualify institutional buyers “in reliance on Rule 114A under the Securities Act of 1933,” says MicroStrategy. This includes persons outside of the U.S., who comply with Regulation S under the same Act.
As far as backing goes, the notes will use MicroStrategy’s existing assets to remain secure. This excludes MicroStrategy’s current bitcoin holdings.
MicroStrategy continues to make bullish investments in BTC
The company has made no less than six major buys since the new year, to take its total bitcoin ownership to nearly $3.4 billion. 20,857 bitcoins were purchased by MicroStrategy in the first quarter of 2021, with an average purchase price of $52,087 per bitcoin or around $1.086 billion total.
According to Michael Saylor, CEO of MicroStrategy, “we will continue to acquire and hold additional bitcoin, as we seek to create additional value for shareholders.” The company’s most recent acquisition was on May 18, when it bought 229 BTC for around $10 million. MicroStrategy’s initial bitcoin purchase was on August 11, 2020, and, since then, the price has increased by 430%.
Some, like chief income strategist at the Oxford Club Marc Lichtenfeld, are lambasting MicroStrategy’s business model of simply buying bitcoin. Even suggesting it is not a business at all and a mere proxy for buying bitcoin with other people’s money.
In a series of tweets, Lichtenfeld made his opinions known, saying “think about this for a minute. $MSTR is not borrowing $400M to grow its business. It is borrowing to gamble on a volatile asset. Would it be OK if it was borrowing the money to buy $AMC? gold? Baseball cards?”