MicroStrategy Raises $650M of Convertible Bonds to Finance Bitcoin Purchases

Vandana  |  Dec 12, 2020

MicroStrategy, a well-known business intelligence firm, has recently announced that it has raised $650 million of convertible bonds. These funds are particularly to finance more Bitcoin purchases. This has been confirmed by the firm on Friday, December 11, 2020, and has been sold at the rate of 0.75%. 

As per the press release:

“MicroStrategy intends to invest the net proceeds from the sale of the notes in bitcoin in accordance with its Treasury Reserve Policy pending identification of working capital needs and other general corporate purposes.”

MicroStrategy Issued Securities Under Rule 144A

Moreover, it is revealed that MicroStrategy has issued securities under Rule 144A of the Securities Act of 1933. All these securities will be available to institutional investors only. The news of raising these bonds came a few days after the firm announced its plans to have more Bitcoin.

The initial target of MicroStrategy was to raise $400 million which has now ended at $650 million and using these, it will be able to purchase around 36,300 Bitcoins. Earlier this year, the firm announced plans to convert the majority of its balance sheet to Bitcoin. At present, the firm is having 49,824 Bitcoins worth around $260 million. 

Overexposed to Bitcoin

With this step by MicroStrategy, analysts are afraid of the firm getting overexposed to Bitcoin. The reason is that Bitcoin is highly volatile and due to this, institutional investors were not very much comfortable in investing in Bitcoin. Even though the firm has become the largest Bitcoin holder, it is not the only one as there are a lot of other firms as well that are holding Bitcoins to a very great extent. MassMutual, an insurance firm based in Massachusetts, has recently purchased $100 million of Bitcoin. Firms like Galaxy Digital, Square, and many other firms have invested a large chunk of funds in Bitcoin.

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