Thread by @BlockBytch_

1/ MicroStrategy has announced a $600M convertible bond raise in order to buy even more Bitcoin

How does this compare to their previous offering?
And is this their last?

2/ First, a convert bond starts as a bond then "converts" to equity. The company pays lower interest rates b/c of this potential conversion. Aka the company will pay for it later w/ equity dilution. A company will choose this route if they have bad credit or expect high growth.

3/ In Dec 2020, MSTR announced their first convert bond offering for the explicit purpose of buying Bitcoin. Citi immediately downgraded MSTR to a “sell” recommendation. The market had a much more bullish take

4/ Investor appetite was so strong that MSTR increased the offering from $400M to $550M w/ the option for another $100M. All of this was filled for a total $650M offering

5/ MSTR also priced their bonds insanely low. Interest was 0.75% / yr. Payments were ~$4M /yr for a company w/ an operating income of ~$40M. That's 10x coverage. 2x is considered strong

6/ Saylor went even further than this aggressive pricing by giving themselves the option to settle the bond in shares or pay out in cash. The bond was struck for $398 per share while the stock was at $289. A 35% premium to investors

7/ MSTR has now announced their new offering of $600M converts w/ a $90M increase. Pricing is still TBD but it isn’t hard to imagine it will be in line w/ the last offering. Will we even see another upsize in the offering given Bitcoin’s continuous rising price?

8/ Why do investors remain excited? MSTR has no debt, apart from the $650M note. They can handle more given a) their operating income and b) their balance sheet has more than doubled from their Bitcoin holding - from $1.1B to $3.4B

9/ MSTR owns more BTC than any other operating company, and it gives it a scarcity value above the value of the core business and BTC holdings.

10/ To many institutional investors, it is *the* company you want to invest in for an “almost free call option on Bitcoin”
millervalue.com/4q20-income-st…

11/ Tesla’s addition of Bitcoin to their balance sheet is helping normalize corps holding Bitcoin as a reserve, but MSTR is the only public company actively taking out debt to acquire more Bitcoin

12/ And, per their “Bitcoin Acquisition Strategy” in their 10K, they have no plans to stop. For the foreseeable future, they will use excess cash flows and debt to acquire more and more Bitcoin

13/ TL;DR: MSTR remains the only public company on the market continuing to take out debt to acquire more Bitcoin. Their pricing of these bonds and rising stock price have shown their success in this strategy. They won’t be stopping anytime soon.