Nasdaq-listed business intelligence firms, Microstrategy is doubling down on its cryptocurrency bet. The Virginia-based company is borrowing $600 million and plans to use the loan proceeds to buy more Bitcoin.
“The notes will be unsecured, senior obligations of MicroStrategy, and will bear interest payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2021. The notes will mature on February 15, 2027, unless earlier repurchased, redeemed or converted in accordance with their terms,” the company said in a statement.
The business intelligence giant, Headed by crypto bull, Michael Saylor, had previously sold debts worth more than $550 million for the explicit purpose of purchasing Bitcoin.
MicroStrategy has good reason to do that again. The publicly-listed company’s share price shot up by approximately 580 percent as MicroStrategy’s Bitcoin bet has turned into a profitable one. The price of Bitcoin rose from $11,000 in August, when it made its first crypto purchase via Coinbase’s institutional service, to pass the $50,000 level today.
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At the current price, Microstrategy’s 72,000 bitcoins are worth more than $3.6 billion. In 2020, the company bought an aggregate of 70,470 bitcoins, which were acquired at an aggregate cost of $1.1 billion or average purchase price of $15,964 per coin, well below current levels.
For reference, MicroStrategy’s market cap stands at $9.15 billion as of Tuesday, meaning the company places nearly 40% of its net value in Bitcoin.
MicroStrategy CEO Saylor, who is now an avid bitcoin advocate, was said to be the one who convinced Elon Musk to move $1.5 billion dollars of Tesla’s funds into bitcoin. Although the big party started after the news of the Tesla purchase and its acceptance of Bitcoin as a form of payment, the electric vehicle maker was not the first heavyweight firm to convert a portion of its cash into bitcoin.
When a wave of institutional investors started to warm to Bitcoin through the second half of 2020, Payment startup, Square and other Wall Street whales including Microstrategy adopted the policy of placing their cash surpluses into crypto.