MicroStrategy Halts Bitcoin Buying Spree, Raises $563M via Preferred Stock

MicroStrategy, the Virginia-based technology company, has been on a relentless buying spree of Bitcoin, amassing a $30 billion stash. However, the company has recently paused its aggressive Bitcoin purchases, according to sources familiar with the matter. Despite this pause, MicroStrategy remains committed to its Bitcoin strategy and the substantial investment it has already made in the cryptocurrency.

MicroStrategy's financial maneuvers have been a topic of interest in the market. The company recently sold preferred stock units at a significant discount, pricing them at $80 apiece, 20% below their marketed price. This move effectively pushed the yield to 10% for buyers, a steep concession to finalize the deal. The company raised $563 million through this sale, more than double its initial target, as it explores multiple funding avenues to support its Bitcoin-buying strategy.

The demand for MicroStrategy's preferred stock units shows the market's interest in this asset class. The company has stated that it could use this new funding source to raise as much as $2 billion this quarter, despite the higher cost compared to its previous ultra-low coupon convertible bonds and at-the-money shares. This initiative is part of the company's broader plan to secure $42 billion over three years via a combination of equity and fixed-income securities, with a shift toward the latter expected this quarter.

The so-called perpetual strike preferred stock will pay investors 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, a lofty threshold that lowers the odds of conversion to common stock in the near term, effectively delaying dilution that would otherwise affect existing shareholders.

MicroStrategy's preferred stock was pitched to income-focused funds, preferred investors, and retail buyers, a different pool from convertible bond buyers. The appeal of MicroStrategy's preferred stock lies in its very attractive yield, which is among the highest in the market. Given the lucrative coupon for MicroStrategy's offering, retail buyers are expected to be a big source of demand once the preferred units list on the exchange under ticker STRK.

MicroStrategy is scheduled to report earnings on Wednesday after the bell. Analysts are expecting a net loss of around $23 million, according to data compiled by Bloomberg. This