"MicroStrategy's Bitcoin Bet: $563M Raised at 10% Yield"

MicroStrategy's capital-raising efforts for its Bitcoin purchases hit a snag as it sold preferred stock units at a significant discount, pushing the yield to 10% for buyers. The company, known for its Bitcoin-focused strategy, priced the shares at $80 apiece, 20% below the marketed price, to attract price-sensitive investors. Despite the discount, MicroStrategy raised $563 million, more than double its initial target, demonstrating the market's interest in this asset class.

Analysts and portfolio managers have mixed views on the deal. James Dinsmore of Gabelli Funds Inc. noted that the pricing was unusually low, while David Clott of Wellesley Asset Management considered the 10% yield appropriate given the company's profile. Clott also highlighted that the deal did not dilute existing investors, as previous convertible offerings had.

This initiative is part of MicroStrategy's broader plan to secure $42 billion over three years through a combination of equity and fixed-income securities. The company has already raised nearly $17 billion through share sales and a smaller amount through convertible debt. With this latest deal, MicroStrategy now owns about $47 billion of Bitcoin, representing over 2% of all the tokens that will ever exist.

The so-called perpetual strike preferred stock offers a quarterly dividend and has a cumulative feature, ensuring that any missed payouts must eventually be made. Its conversion price is set at $1,000, roughly 200% above its latest closing price, effectively delaying dilution for existing shareholders. The preferred stock was pitched to income-focused funds, preferred investors, and retail buyers, a different pool from convertible bond buyers.

MicroStrategy is scheduled to report earnings on Wednesday after the bell. Analysts expect a net loss of around $23 million, marking a fourth consecutive quarter of losses for the company. The challenge of analyzing MicroStrategy's credit profile and business model persists for investors, as the company trades at a more than 200% premium to the value of the Bitcoin it owns, a level that can change rapidly.

As Bitcoin's price fluctuates, investors must consider the potential risks to the company's capital structure. While a 10% yield may seem attractive, a significant drop in Bitcoin's price could alter the investment's appeal. Despite these challenges, MicroStrategy continues to explore new funding avenues to support its