MicroStrategy Receives $ 1.6 Billion In Junk Bond Offers To Buy Bitcoin
Software company MicroStrategy raised $ 1.6 billion in a junk bond offering – four times its original target.
Earlier this week, the company announced that it would be issuing $ 400 million worth of junk bonds in a private offering to use the proceeds to purchase Bitcoin (BTC).
Junk bonds are bonds issued by non-investment grade companies and typically offer investors higher returns with higher risk. The bonds issued yields between 6.125% and 6.25%, which dwarfs government bond yields.
“The Notes are fully and unconditionally guaranteed on a senior secured basis by MicroStrategy Services Corporation, a wholly-owned subsidiary of MicroStrategy, and certain MicroStrategy subsidiaries that may be incorporated or acquired upon completion of the Offering. explained the announcement by MicroStrategy.
A day later, the company announced it would increase its bond offering to $ 500 million, whereupon it was inundated with contracts valued at $ 1.6 billion.
MicroStrategy currently holds the most bitcoins on its balance sheet of any publicly traded company, which equates to a dollar valuation of around $ 3.2 billion – more than double the value of bitcoin held by Tesla ($ 1.4 billion ).
MicroStrategy’s share price rose for much of 2020 and 2021 in line with the rising price of Bitcoin. But keeping Bitcoin on the balance sheet wasn’t enough to stop MicroStrategy’s stock slide that eventually came when the cryptocurrency market collapsed. Since Bitcoin peaked in early April, MicroStrategy’s share price has fallen 45%.
MicroStrategy also announced the formation of a new subsidiary holding its existing 92,079 bitcoins called MacroStrategy LLC.
The reactions to the news on social media tended to be different. Bitcoin supporters celebrated the news, noting the massive excess demand for MicroStrategy’s bonds.
MicroStrategy proposed $ 400 million in bonds to buy more #Bitcoin, and they received $ 1.6 billion in interest.
They were asked for 4x more than they were offered.
– Documentation of Bitcoin (@DocumentingBTC) June 8, 2021
Crypto skeptic Peter Schiff questioned the wisdom of buying a historically volatile asset. Schiff asked how a sudden drop in the price of Bitcoin would affect MicroStrategy’s operations.
I don’t think @michael_saylor is familiar with Murphy’s Law. What if #Bitcoin crashes below $ 20,000? Will #MicroStrategy sell stocks at low prices to prop up its balance sheet? Will it sell Bitcoin to raise cash? If MicroStrategy goes bankrupt, will the creditors HODL their bitcoins?
– Peter Schiff (@PeterSchiff) June 8, 2021