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MicroStrategy's Bitcoin Bet: Raising $563M for Crypto Acquisition

Coin WorldFriday, Jan 31, 2025 2:04 pm ET

1min read

MicroStrategy's recent capital raise illustrates the company's unwavering commitment to Bitcoin accumulation amidst a rapidly evolving crypto landscape. By offering 7.3 million shares of its newly introduced perpetual preferred stock, MicroStrategy not only garners significant capital but also signals confidence in the future trajectory of Bitcoin prices.

Mark Palmer from Benchmark noted that the option to convert preferred shares into common stock provides investors with an "elements of volatility and optionality," highlighting investor sentiment toward increasing Bitcoin value. MicroStrategy raises $563.4 million through the sale of preferred stock to fund further Bitcoin acquisitions, anticipating a favorable market for the cryptocurrency.

MicroStrategy's strategic stock offering has implications for Bitcoin investments. On January 30, 2023, the company successfully priced its offering of 7.3 million shares of 8% Series A perpetual strike preferred stock at an impressive $80 per share. This nearly triples the initial offering of 2.5 million shares, showcasing a robust investor demand and confidence in the company's strategy. With expected net proceeds of approximately $563.4 million, MicroStrategy plans to leverage these funds for corporate purposes, specifically to acquire more Bitcoin.

The nature of perpetual preferred stock and its benefits are worth noting. Perpetual preferred stock is a unique financial instrument that does not have a set maturity date. Instead, it allows the issuing company to pay fixed dividends indefinitely as long as it remains operational. In this instance, MicroStrategy's preferred stock features a liquidation preference of $100 per share and accumulates dividends at a fixed rate of 8% annually. Regular dividends will only be paid if declared by the board, providing flexibility in a volatile market.

Market reactions and long-term projections suggest a positive outlook for MicroStrategy's Bitcoin investments. According to research from Mizuho Securities, Bitcoin's price has substantial upward potential, with predictions suggesting a possible 30% increase over the next three years. This optimistic outlook is expected to translate into positive performance for MicroStrategy's stock (MSTR). They project that by the end of 2027, the company could hold about 783,000 BTC, valued at approximately $130 billion, reflecting an estimated market price of $166,000 per Bitcoin.

MicroStrategy's stock performance and market position demonstrate the company's resilience.

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