MicroStrategy shares up 180% this year after debt sale to buy more bitcoin spurs latest rally

Whenever Michael Saylor utters the word bitcoin, MicroStrategy shares pop. He’s been doing a lot of uttering lately.

On Monday, the MicroStrategy founder posted on X that his company had just purchased another 12,000 bitcoins for close to $822 million “using proceeds from convertible notes & excess cash.” That brings MicroStrategy’s total holdings to 205,000 bitcoins, which are now worth more than $15 billion, as the cryptocurrency continues to hit fresh highs.

Bitcoin rose 2.7% on Wednesday, topping $73,400.

MicroStrategy, a company that develops software but serves primarily as a proxy for bitcoin, climbed 11% on Wednesday, following Tuesday’s 7.4% rally, which followed Monday’s 4.1% gain and Friday’s 9.7% jump. The stock is now up 68% since March 6, the day the company announced the pricing of a debt sale, and has rocketed 180% this year after soaring 346% in 2023.

Saylor told CNBC’s “Squawk Box” on Monday that bitcoin is going to “eat gold.” And he said many more institutional investors are going to own the digital currency as it gets added to exchange-traded funds. Plus, Saylor is bullish on next month’s halving process, which occurs every four years and slows the supply of coins, reducing the amount of selling.

“The price of bitcoin is going to have to adjust up in order to meet that investor demand,” Saylor said. “That’s what’s going to happen next for the asset class.”

MicroStrategy said on Monday that it had completed an offering of 0.625% convertible notes due in 2030, with net proceeds of about $782 million. Canaccord Genuity analysts wrote in a note that day that they believe it’s the first $800 million convert due in 2030 that’s marketed at a coupon rate below 1% with such a high conversion premium.

“While much of the company’s BTC accumulation late last year and early this was funded using equity,” the analysts wrote, “the company this time instead exploited more of its full capital structure by issuing a convert.”

MicroStrategy said in the release that it “used the net proceeds from the sale of the notes to acquire additional bitcoin.”

MicroStrategy has purchased close to 16,000 bitcoins since the start of the year.

Its stock value is appreciating at a much faster clip than the bitcoin that it’s buying. As of Monday, Canaccord’s analysis showed that MicroStrategy’s equity value premium over its bitcoin holdings was 86%.

That number has risen substantially in the past three days. Using Canaccord’s methodology, MicroStrategy’s equity value premium is now up to about 99%.

Founded in 1989, MicroStategy has a business in enterprise software and cloud-based services, but its shareholder value is almost entirely tied to its bitcoin ownership. The company announced its plan to invest in bitcoin in mid-2020, disclosing in an earnings call that it would commit $250 million over the next 12 months to “one or more alternative assets,” which could include digital currencies like bitcoin.

At the time, MicroStrategy’s market cap was about $1.1 billion. The company is now worth $30 billion.

“Is there any company in the world that you wouldn’t like to invest in that could borrow $1 billion at less than 1% interest to invest in your best idea?” Saylor said on CNBC. “It’s given our shareholders more bitcoin per share this week than they had a few weeks ago, so it’s very accretive for them.”

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