After deciding to spend $1.5 billion to buy more bitcoins, MicroStrategy’s stock outpaced the market, rising 5.36%, according to reporter Colin Wu.
After deciding to use $1.5 billion to buy more bitcoins, MicroStrategy’s stock price bucked the market and rose by 5.36%, Tesla’s stock price fell by 2.97%, Coinbase fell by 2.88%, and Square fell by 1.39%. pic.twitter.com/iy5Aj77zJs
— Wu Blockchain (@WuBlockchain) June 16, 2021
Tesla’s shares fell 2.97%, Coinbase fell 2.88%, and Jack Dorsey’s Square shares dropped 1.39%, the journalist noted.
On June 14, the business analytics software provider announced the issuance of $500 million convertible senior notes with a coupon rate of 6.125%. The raised funds will be used to buy bitcoin, as will the capital from the announced additional stock offering of $1 billion.
“The market value of MicroStrategy is $6.14 billion, and its 92,079 BTC are worth $3.69 billion. After continuing purchases, it will become a true bitcoin-ETF”, Wu said.
In a recent CNBC interview, MicroStrategy chief executive Michael Saylor did not actively refute such a comparison, and emphasised the advantages of the company’s shares relative to ETFs.
He also noted that the firm has historically tapped debt financing to buy the leading cryptocurrency.
However, in Colin Wu’s view, the interest rate on the latest tranche of bonds could be a problem for the company.
“The interest rate is 6.125% per year, or $30.625 million. As soon as MicroStrategy’s stock price falls, for example below $397.99, the pressure on the convertible bonds the firm will face will be enormous,” Wu said.
Earlier, in January 2021, Saylor said MicroStrategy would continue to deploy free cash flow into Bitcoin and would consider new opportunities to invest in the leading cryptocurrency.