- MicroStrategy already Owns over 92,000 BTC worth billions in US dollars
- With $ 500 million worth of corporate bonds, BTC assets are set to grow even further
- Does CEO Michael Saylor’s risky”all in” strategy work?
MicroStrategy caused a stir in the past with its million-dollar investment in the Bitcoin (BTC). Already a few months ago, the American software company shifted a three-digit million amount into the largest cryptocurrency by market capitalization. But this does not seem to mean the end of MicroStrategy’s plans. Rather, the software giant plans to significantly increase its BTC assets even further. Thus, the company announced that it intends to issue bonds worth over $ 400 million to acquire more BTC. The corporate bonds enjoyed such great popularity that requests with four times the volume were ultimately booked.
MicroStrategy Wants to Increase BTC Assets
American software giant MicroStrategy, led by CEO Michael Saylor, already looks at a fortune of over 92,000 BTC acquired in the past. The investment paid off after just a few months, as the Bitcoin could subsequently record a huge increase in value. Currently, the largest cryptocurrency by market capitalization is in a downward spiral, which the American company has apparently identified as a favorable entry point. As MicroStrategy announced in a press release, the company intends to issue so-called senior secured notes worth $ 400 million.
Senior secured notes are a form of debt securities without an investment grade rating, which combines them with a higher risk, but also with a comparatively high yield. In the case of MicroStrategy’s bonds, yields of 6,125 and 6,25 percent were issued. As can be seen from the report, the software manufacturer founded two new subsidiaries, which on the one hand are to manage the issuance of the promissory notes and on the other hand the entire BTC assets. From now on, the Bitcoins are in the hands of the new MacroStrategy LLC.
The envisaged 400 million US dollars, which were initially collected via the promissory notes alone, enable the purchase of well over 10,000 BTC according to the prices of recent weeks. Thus, the new company would manage over 100,000 BTC. But apparently MicroStrategy was able to collect significantly more money, because it did not stay with the announced 400 million US dollars.
– Michael Saylor (@michael_saylor) June 7, 2021
Strong interest in MicroStrategy corporate bonds
Michael Saylor is undoubtedly a big proponent of bitcoin, but the scale of the investment plans is surprising. Meanwhile, MicroStrategy seems to be going “all In” Bitcoin. However, despite a possible risk, this circumstance does not deter the funders. On the contrary, the corporate bonds issued sparked a hype, followed by $ 1.6 billion in inquiries. Just one day after the announcement, MicroStrategy raised the bonds to $ 500 million.
In its entirety, however, the investment strategy of the company, which was founded in 1989, is fraught with doubts. A recent annual report of the US Financial Supervisory Authority (SEC) shows that a loss of 284.5 million US dollars was recorded at the end of the first half of 2021. As before, the company has not sold its BTC and continues to hold on to the digital coins. In the course of investing in the crypto market, the price of the company’s stock also increased dramatically. But the stock market price is currently about 50 percent below the All Time high of $ 1,272.
Reactions on social media were mixed. Some congratulated MicroStrategy on the decision to buy even more BTC. Others criticized the investment, as it could bring serious existential problems for the company in the event of a negative outcome. Peter Schiff, a well-known crypto critic, questioned the decision, suggesting that MicroStrategy could not have a plan B in the event of a Bitcoin crash.
I don’t think @ michael_saylor is familiar with Murphy’s Law. What if # Bitcoin crashes below $20K? Want #MicroStrategy sell stock at depressed prices to shore up its balance sheet? Will it sell Bitcoin to raise cash? If MicroStrategy goes bankrupt will creditors HODL its Bitcoin?
– Peter Schiff (@PeterSchiff) June 8, 2021
Conclusion: MicroStrategy with risky investment strategy
It should already be known that MicroStrategy takes a different path than other companies in the case of its long-term investments. However, due to current news, the strategy is more like an”all in” strategy in the Bitcoin. According to them, MicroStrategy issued corporate bonds in the millions in order to be able to buy more BTC through external access to money. The target of Michael Saylor, the company’s CEO, is likely to be the magical 100,000 BTC limit that MicroStrategy is expected to crack with the issuance of the bonds.
It is not without reason that the decision is viewed critically. The company has already invested a significant part of its cash reserves in BTC and has raised a high three-digit million sum externally for further purchases. If the strategy does not work out in the worst case, the software company is likely to find it difficult to cover the high repayments. It is unclear how sophisticated the contingency plans are by those responsible at MicroStrategy. The future will reveal the success or failure of the investment strategy.