Bitcoin News Today: Strategy’s Convertible Bonds Surge 63% as Bitcoin Strategy Boosts Stock

Strategy’s convertible bond prices have surged as the company’s stock price advances back toward its record high. The company’s aggressive bitcoin acquisition strategy has significantly boosted the value of its convertible debt. With bitcoin prices steady near their record high and the company’s shares rebounding toward $450, five of the six convertible bonds outstanding are now deep in the money. This means the stock price exceeds their conversion prices, creating billions in unrealized value.

The company issued convertible notes totaling $8.2 billion in notional principal with ultra-low average coupons of just 0.421%. These bonds, which mature between 2028 and 2032, carry a set price based on the company’s stock and bitcoin levels at the time of issuance, at which the debt can be converted into common stock. The rally in the company’s stock has pushed the bonds’ market value to $13.4 billion, roughly $5.2 billion above their notional value. This premium reflects how much investors are willing to pay in secondary markets, driven by the bonds’ potential to convert into valuable equity.

However, the company has recently paused issuing new convertible notes. This pause may be due to more cautious sentiment as reflected in the options market. As of July 15, the company’s implied volatility sits at 53.1%, well below past highs above 200%. Implied volatility is an indication of how much the options traders believe the stock will move in the future based on their market positioning. Open interest remains healthy at over 2.4 million contracts, but both the open interest put-call ratio (0.93) and the volume put-call ratio (0.62) indicate neutral sentiment, suggesting traders are not aggressively betting on a major surge in the stock.

This muted options activity implies that while the company’s price is high enough to put five of the six convertible bonds deep in the money, there may not be the same frothy market enthusiasm that allowed the company to issue convertibles at ultra-low coupons and favorable terms. Investors might demand higher yields or lower conversion prices for any new issuance, which could dilute existing shareholders sooner. The company’s convertible debt sales have fueled its bitcoin purchases, driving bond values higher as five of six notes trade deep in the money, creating billions in unrealized value.