In a bold move to expand its already substantial bitcoin holdings, MicroStrategy has announced plans to raise a staggering $2 billion through a perpetual preferred stock offering. The business intelligence firm, led by bitcoin bull Michael Saylor, is doubling down on its cryptocurrency treasury strategy, aiming to capitalize on the unique benefits of this innovative financial instrument.
The Perpetual Advantage
Perpetual preferred stock offers several key advantages over the convertible bonds MicroStrategy has previously used to acquire bitcoin. As executive chairman Michael Saylor explained in a recent investor meeting:
Perpetual preferreds are advantageous due to their extended duration. The instrument works as an embedded, indefinite call option in addition to a lump-sum principal payment.
This extended duration makes the company’s capital structure less fragile, providing a longer-term foundation for its bitcoin holdings. Additionally, the perpetual preferred stock could potentially achieve a mid-single-digit yield with low volatility and no options market—a stark contrast to the more complex dynamics of convertible bonds.
Attracting Institutional Investors
The perpetual preferred stock offering is expected to be particularly appealing to large institutional investors, such as pension funds and banks. These investors are drawn to the stable, fixed dividend payments provided by this type of security, which can offer a reliable income stream in a low-yield environment.
By targeting this investor class, MicroStrategy is tapping into a deep pool of capital that can help fuel its bitcoin acquisition strategy over the long term. The company’s commitment to holding bitcoin on its balance sheet has already distinguished it from other publicly traded companies, and this latest move further cements its position as a leading corporate adopter of cryptocurrency.
Terms and Timeline
While the specific terms of the perpetual preferred stock offering have not yet been announced, MicroStrategy has indicated that the offering will take place sometime in the first quarter of 2025. The terms are likely to include details on dividend payments, convertibility to class A common stock, and provisions for the redemption of shares.
Investors will have the opportunity to weigh in on the offering at MicroStrategy’s upcoming Special Meeting for Shareholders, scheduled for January 21. At this meeting, shareholders will vote on proposals to increase the authorized class A common stock and preferred stock, paving the way for the perpetual preferred stock offering to proceed.
Building on Bitcoin Momentum
MicroStrategy’s perpetual preferred stock offering comes on the heels of its recent acquisition of an additional 2,530 bitcoins, bringing its total holdings to an impressive 450,000 BTC. The company’s unwavering belief in bitcoin as a superior store of value and its willingness to leverage innovative financial instruments to increase its holdings have made it a standout in the corporate world.
As MicroStrategy continues to blaze a trail in corporate bitcoin adoption, the success of its perpetual preferred stock offering will be closely watched by investors and other companies considering similar strategies. With the potential to attract significant institutional investment and provide a stable foundation for long-term bitcoin holdings, this offering could mark a new chapter in MicroStrategy’s ongoing bitcoin journey.
The coming weeks will be crucial for MicroStrategy, with the shareholder meeting and the release of its Q4 earnings call on February 4 providing further insight into the company’s financial performance and the progress of its bitcoin acquisition plans. As the world of cryptocurrency continues to evolve, MicroStrategy’s bold moves are sure to keep it at the forefront of this exciting and transformative industry.
