In a press release on December 7, MicroStrategy, a publicly traded company on the Nasdaq (MSTR) focusing on business intelligence, announced they will be raising $400 million to purchase bitcoin.
The highlights:
- The $400 million will be raised through convertible notes
- The notes will be unsecure, senior obligations with a 5 year term, maturing December 15, 2020
- The note will be convertible to cash, MSTR common stock or a combination of the two
- This is a private offering to qualified institutional investors
- MicroStrategy explicitly intends to invest the new capital into bitcoin
Why it matters
MicroStrategy purchased $250 million in bitcoin back in August of 2020 and then picked up another $175 million BTC in September. With a total investment at that point of $425 million in BTC, the new $400 million investment will bring their total to $825 million BTC. The crypto-purchases in August and September are held on their balance sheet as a treasury reserve asset. This presumably means they want to hold their reserves in something other than the dollar, and have opted for BTC. The implication is that they want assets that will perform well if the dollar weakens, which is very possible with the current levels of money printing and mixed economic outlook. The latest raise shows they are doubling down on the strategy. With the target being institutional investors, this gives large firms, hedge funds and endowments an opportunity to invest in Bitcoin without having to buy it directly. This is an example of the proverbial institutional wall of money finding it's way into the cryptocurrency markets. Ultimately, the new money flowing into the cryptocurrency markets could place upward pressure on the price of BTC.
