MicroStrategy Completes $3B Note Offering Amid Stock Decline

TLDR

• MicroStrategy’s stock fell 16.2% despite Bitcoin hitting new highs near $100,000
• Company completed a $3 billion offering of 0% convertible senior notes
• MicroStrategy plans to raise $42 billion over 3 years for Bitcoin purchases
• Currently holds 331,200 Bitcoin worth over $32.7 billion
• Stock trading volume exceeded major companies like Nvidia and Tesla

MicroStrategy, the business intelligence company known for its massive Bitcoin holdings, experienced a notable stock decline of 16.2% on Thursday, November 21, 2024, even as Bitcoin reached new highs near $100,000.

The company simultaneously announced the completion of a $3 billion convertible note offering, marking another step in its ambitious cryptocurrency acquisition strategy.

The stock’s decline came after reaching record highs earlier in the week, with the company’s market capitalization briefly exceeding $100 million.

This valuation represented more than triple the worth of MicroStrategy’s Bitcoin holdings, which currently stand at 331,200 BTC, valued at approximately $32.7 billion at current prices.

The newly announced convertible senior notes, due in December 2029, carry a 0% interest rate and come with a 55% premium, setting an implied strike price of around $672 for the company’s class A common stock.

These notes give holders priority over common stockholders in case of bankruptcy or liquidation but do not pay regular interest.

$MSTR has completed a $3 billion offering of convertible notes at 0% coupon and 55% premium, with an implied strike price of ~$672. https://t.co/GzO0br0Xfh

— Michael Saylor⚡️ (@saylor) November 21, 2024

Trading volume for MicroStrategy’s stock reached extraordinary levels, surpassing that of established tech giants like Nvidia and Tesla. The company became the second most-traded stock in the U.S. markets on November 20, contributing to a record $70 billion trading volume from what market observers call the “Bitcoin Industrial Complex.”

The $3 billion raise is part of MicroStrategy’s broader “21/21” plan, which aims to raise $42 billion over the next three years – split equally between equity and fixed-income securities. With the current Bitcoin price, the latest $3 billion offering could potentially add about 30,600 Bitcoin to the company’s holdings.

Despite Thursday’s decline, MicroStrategy’s stock performance in 2024 remains remarkable, showing a 480% increase year-to-date. However, some market analysts have begun questioning the company’s valuation metrics.

Citron Research’s Andrew Left, previously bullish on the stock, announced a hedge by shorting MicroStrategy shares while maintaining a positive outlook on Bitcoin itself. Left noted that MicroStrategy’s valuation had “completely detached from bitcoin fundamentals.”

How did this one age? Nearly 4 years ago to the date, Citron was the first to tell readers that MicroStrategy was the ultimate way to invest in Bitcoin, setting a $700 target.
Fast forward to today: $MSTR has skyrocketed to over $5,000 (adjusted). Kudos to Michael Saylor for…

— Citron Research (@CitronResearch) November 21, 2024

Technical analyst Bracco identified what he called a “textbook parabolic short” in MicroStrategy’s stock, pointing to three consecutive days of double-digit percentage gains and major overnight price gaps as warning signs.

The Wall Street Journal’s Heard on the Street column highlighted the feedback loop that has boosted the stock: rising valuations enable favorable capital raising, leading to more Bitcoin purchases, which in turn drives further stock appreciation.

MicroStrategy’s convertible notes offering structure means bondholders won’t receive regular interest payments. Instead, the notes are sold at a discount and mature to face value if not converted before the maturity date in December 2029.

The company’s stock saw some recovery in after-hours trading, rising 5.3% following the regular session’s decline. This movement came as Bitcoin continued to trade near its all-time highs, hovering around $98,423.

Market data shows MicroStrategy maintains its position as the public company with the largest Bitcoin holdings. The latest capital raise could potentially increase this lead further, depending on how the company deploys the newly raised funds.

The $3 billion offering underwent several adjustments before completion, starting with an initial announcement of $1.75 billion on November 18, which was then increased to $2.6 billion on November 20, before reaching its final $3 billion figure.

Thursday’s trading session saw MicroStrategy’s stock price fall from its peak of $536.7 to close at $397.28, representing a more than 25% decline from the day’s highest point.

The cryptocurrency market context remains strong, with Bitcoin trading just 1.5% away from the $100,000 milestone, according to CoinGecko data. This broader market strength contrasts with MicroStrategy’s stock performance on Thursday.