Software company turned glorified Bitcoin (BTC-USD) holding company MicroStrategy (NASDAQ:MSTR) is seeing some volatility today, with MSTR stock giving up a good chunk of yesterday’s gains. At the time of writing, the company’s stock price has dropped more than 7% on news that the company will be putting forward its second convertible note offering in the past 10 days, with the intention of buying more Bitcoin.
MicroStrategy’s CEO, Michael Saylor, has been steadfast in his view that Bitcoin is the only reasonable asset companies should be holding on their books. He’s taken this strategy to the extreme – using debt to fund Bitcoin purchases in recent years. That’s a strategy he’s continued during bull and bear markets and one that’s paid off handsomely overall, with Bitcoin hovering above $70,000 per token.
Today, the market appears to be taking a breather, assessing whether such an aggressive strategy (with Bitcoin trading at its current levels) makes sense. Let’s dive into what to make of today’s move and where this company could be headed from here.
MSTR Stock Dips on Plans to Use Debt to Buy More Bitcoin
Putting today’s move in MSTR stock in context is important. Yes, the stock is down 7% from yesterday’s close. But all things considered, this stock remains very close to its all-time highs, which were hit yesterday. MicroStrategy’s stock price has absolutely gone parabolic, soaring more than 110% over the past month alone (and that’s including today’s decline).
That said, today’s announcement of yet another convertible note offering appears to have some investors hitting the sell button. This latest offering of $500 million of convertible senior notes will be made available to qualified institutional buyers, with an additional option for such buyers to purchase an additional $75 million if the offering is filled.
The precise interest rates and conversion rates for the loan won’t be available until the pricing of the offering, but these notes will mature in 2031 (7 years in length).
Using debt to acquire Bitcoin has been a strategy many frowned upon during the depths of the previous Bitcoin bear market. However, MicroStrategy has more than weathered the storm, continuing to buy depressed Bitcoin at bargain prices. That’s turned out to be a good strategy.
Now, the question is whether buying Bitcoin above $70,000 per token makes sense. Michael Saylor seems to think so, but the market appears to be taking a bit of a more cautious view.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
