Nasdaq-listed business intelligence software firm MicroStrategy has detailed in a press release it is offering $550 million worth of convertible senior notes in a private placement to qualified institutions and plans to use the proceeds to buy more bitcoin.
According to the press release, the private placement is expected to close on December 11, and the firm estimates that the net proceeds of the offer will be of $537.2 million after subtracting associated expenses and discounts.
The press release comes shortly after MicroStrategy revealed it planned to raise $400 million via a private offering of convertible senior notes so that it could buy more BTC.
The notes will be unsecured senior obligations of MicroStrategy and will have an interest rate of 0.75% per year, payable to investors twice a year on June 15 and December 15, beginning in June 2021. The notes mature on December 15, 2025, “unless earlier repurchased, redeemed or converted in accordance with their terms.”
MicroStrategy points out that it plans to use the proceeds to buy more BTC:
MicroStrategy intends to invest the net proceeds from the sale of the notes in bitcoin in accordance with its Treasury Reserve Policy pending the identification of working capital needs and other general corporate purposes.
The conversion rate for the notes will initially be 2.5126 shares of MicroStrategy Class A common stock per $1,000 principal amount of notes, translating to a premium of about 37% over the stock’s closing price of $289 as of December 8.
The announcement comes days after MicroStrategy revealed it bought an additional 21,454 bitcoins at an aggregate purchase price of $250 million.
Citi Analyst Lowers MicroStrategy to ‘Sell’
Tyler Radke, an analyst at Citi, has lowered his recommendation on the Nasdaq-listed business intelligence firm from “neutral” to “sell,” waning investors in a research note that the firm’s investments in bitcoin may be overextended.
Per Radke, CEO Michael Saylor has been having a “disproportionate focus” on bitcoin, which could be a troubling trend for the firm. Per the analyst, the debt offering to fund more BTC purchases adds “incremental risk to the story.”
The analyst moved his price target for MicroStrategy’s stock to $250, up from his previous recommendation of $200.
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