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The company had planned to raise $400 million through a bond sale.
MicroStrategy received $1.6 billion in orders in a recent junk bond sale, which was four times the amount sought.
Earlier this week, the business stated that it will issue $400 million in junk bonds in a private sale, with the profits going towards the acquisition of Bitcoin (BTC).
Junk bonds are debt offers by corporations that do not have investment-grade credit ratings, and they often offer investors larger yields at a higher risk. Bonds with returns ranging from 6.125 percent to 6.25 percent have been launched, outperforming government bonds.
According to MicroStrategy’s announcement, “the notes will be fully and unconditionally guaranteed on a senior secured basis, jointly and severally, by MicroStrategy Services Corporation, a wholly owned subsidiary of MicroStrategy, and certain subsidiaries of MicroStrategy that may be formed or acquired after the closing of the offering.”
One day later, the firm announced it would increase its bond offering to $500 million, after which it was inundated with $1.6 billion worth of orders.
MicroStrategy currently holds the most Bitcoin on its balance sheet out of all publicly traded companies, amounting to a dollar valuation of around $3.2 billion — more than twice the value of Bitcoin held by Tesla ($1.4 billion).
MicroStrategy’s stock price rose in tandem with the price of Bitcoin during much of 2020 and 2021. However, having Bitcoin on its balance sheet was insufficient to prevent MicroStrategy’s shares from falling when the cryptocurrency market fell. MicroStrategy’s share price has dropped by 45 percent since Bitcoin peaked in early April.
MicroStrategy also confirmed the foundation of a new company, MacroStrategy LLC, to house its current 92,079 Bitcoins.
Reaction to the news on social media was typically varied. Bitcoin supporters celebrated the news, noting the massive excess in demand for MicroStrategy’s bonds.
MicroStrategy proposed $400 Million in bonds to buy more #bitcoin and they got $1.6 Billion of interest.
They got 4x more in demand than what they offered.
— Documenting Bitcoin 📄 (@DocumentingBTC) June 8, 2021
Crypto skeptic Peter Schiff questioned the wisdom of purchasing an asset that has been historically volatile. Schiff asked how a sudden drop in the price of Bitcoin would affect MicroStrategy’s business operations.
I don’t think @michael_saylor is familiar with Murphy’s Law. What if #Bitcoin crashes below $20K? Will #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
Let’s wait and see.