MicroStrategy Plans $500M Preferred Stock Offering for Bitcoin Acquisition

MicroStrategy, a leading enterprise analytics software company, has announced plans to raise $500 million through the issuance of 5,000,000 shares of its 10.00% Series A Perpetual Strife Preferred Stock. The company has filed with the US Securities and Exchange Commission (SEC) to proceed with this public offering, with the net proceeds intended for general corporate purposes, including the acquisition of Bitcoin and working capital. The preferred stock will offer a fixed annual cumulative dividend rate of 10.00%, payable quarterly starting from June 30, 2025. If dividends remain unpaid, they will accumulate at an initial rate of 11% per annum, with the potential to increase by 100 basis points quarterly up to 18% annually. The initial liquidation preference is set at $100 per share, with daily adjustments based on market conditions. The company has the right to redeem the shares if outstanding shares fall below 25% of total issued shares or upon certain tax events. Morgan Stanley, Barclays, Citigroup, and Moelis & Company are serving as joint book-running managers for the offering.

This strategic move by MicroStrategy underscores its unwavering commitment to Bitcoin as a primary treasury reserve asset. The company has a history of leveraging proceeds from equity and debt financings, as well as operational cash flows, to accumulate Bitcoin. By offering this new series of preferred stock, MicroStrategy aims to further enhance its Bitcoin holdings, aligning with its established digital asset strategy. The unique structure of the preferred stock, including the adjustable liquidation preference and the punitive compounding dividend structure, reflects the company's strong conviction in Bitcoin and its willingness to incur significant financial obligations to support this strategy. The 10% dividend rate, which is notably high in the current environment, highlights the risk profile associated with the company's Bitcoin-focused approach and the cost of raising capital for this purpose. This creates a substantial fixed financial obligation of approximately $50 million annually in dividend payments, impacting cash flows regardless of Bitcoin performance.

The offering represents a creative financial engineering approach to fund Bitcoin acquisitions without diluting common shareholders. The preferred stock's structure allows for leveraged Bitcoin exposure, where common shareholders retain upside potential while preferred holders receive fixed income returns secured by the company's Bitcoin holdings and operations. This structure provides a unique investment opportunity for Bitcoin-curious institutional investors, offering income characteristics that pure Bitcoin lacks. The full redemption provision, triggered when less than 25% of shares remain outstanding, creates a potential endgame mechanism that might eventually be deployed after the Bitcoin strategy has matured, giving the company flexibility for future capital structure adjustments.