MicroStrategy to borrow $400 million to buy more Bitcoin even as its stocks plunged from an all-time high of $1292 to $472
Microstrategy made the headlines in 2019 after it sold the domain name Voice.com to Block.one for $30 million for its new blockchain-based social media platform. As we reported back then, MicroStrategy is a Virginia-based tech company founded by the renowned Bitcoin investor Michael Saylor. On December 21, 2020, MicroStrategy announced it purchased a total of 70,470 bitcoins for $1.125 billion at an average price of $15,964 per bitcoin.
Then in February when bitcoin was trading above $50,000, MicroStrategy announced it was borrowing $600 million to buy more of the speculative cryptocurrency, upsizing its debt offering through convertible notes to $900 million. Today, bitcoin is trading at $35,800, shedding more than $13,000 from its February 19 high.
Now the company is doubling down its investment in bitcoin. Today, MicroStrategy announced it’s borrowing $400 million to buy more Bitcoin It’s the first-ever junk bond sale used for financing purchases of the volatile cryptocurrency, according to a report from Bloomberg. In addition, the company also announced two new entities — MicroStrategy Services Corporation and MacroStrategy LLC, to hold its bitcoin.
In a separate report, MicroStrategy also said in an SEC filing that it expects to incur an impairment loss of at least $284.5 million related to its bitcoin holdings for the three months ending June 30, 2021.
“The notes will be fully and unconditionally guaranteed on a senior secured basis, jointly and severally, by MicroStrategy Services Corporation, a wholly-owned subsidiary of MicroStrategy, and certain subsidiaries of MicroStrategy that may be formed or acquired after the closing of the offering,” said MicroStrategy.
Commenting on Microstrategy bitcoin investment, Marc Lichtenfeld, chief income strategist at the Oxford Club told Bloomberg:
“The $400 million in debt isn’t being used to fund an acquisition or growth. It’s being used to speculate on a volatile asset. Does MicroStrategy even have a business anymore or is it simply a proxy for Bitcoin — with borrowed money?”