MicroStrategy Makes $700M Stock Sale to Buy Bitcoin
Despite minor downturns in Bitcoin’s price, MicroStrategy plans a major stock sale to purchase Bitcoin with the funds. Individuals and corporations worldwide buy the dip.
After initially announcing a $500 million stock sale to use the proceeds to purchase Bitcoin, MicroStrategy doubled down on the plan by raising the figure to $700 million.
On the surface, Bitcoin has been having something of a tough week. Although Bitcoin’s stability and certain market factors led to rumors that a bull market may be imminent, several noticeable hazards were also identified that might impede Bitcoin’s immediate growth potential. Of these dangers, skittishness in Bitcoin traders themselves seemed more immediate than any of the more common culprits for Bitcoin downturns, like prominent exchange failures or government crackdowns, for example. This skittishness clearly manifested in Bitcoin’s price early this week, albeit with bright spots like ETF overperformance keeping optimism reasonably high. By now, the ETF market has also seen a major downturn, and Bitcoin’s price over the week fell by about $5k.
However, despite these minor setbacks, it’s clear that plenty of investors are seeing this dip as a major opportunity for long-term profit. For example, by June 12th, observers were noting that Bitcoin accumulation from whales had reached the highest level in the last four years, levels that happened shortly before Bitcoin’s dramatic bull run in 2020. By the following day, the raw data on the subject was quite clear: this momentary price slip was a “buy the dip” bonanza for whales, with $1.4B going into whale accounts over a 24-hour period. Considering the speed of this fire sale next to the window of deflated Bitcoin prices, rates of accumulation like this suggest real confidence in Bitcoin’s longer-term prospects.
Anonymous whale purchases like this may suggest a deeper confidence within the community, but nevertheless, these signs are somewhat more obscure to a more casual observer. Sometimes, it’s necessary for Bitcoin’s supporters to be more outspoken, taking a clear stance on its overall viability that’s harder to ignore. In that respect, Michael Saylor, founder of MicroStrategy, has certainly been an important standard-bearer. On June 13th, Saylor made a bombastic announcement when he claimed that MicroStrategy would be raising $500 million through stock sell-offs to fund new Bitcoin purchases. Despite the minor setbacks that the cryptoasset has seen, Saylor made a very public display of confidence in Bitcoin’s reliability, albeit with the caveat that some portion of the funds may be used for other purposes.
Clearly, either this caveat seemed too wishy-washy as a display of confidence or otherwise the team at MicroStrategy saw the opportunity for much larger profits because this initial sale was raised to $700 million the very next day. This sale specifically takes the form of convertible senior notes, a type of debt that offers additional flexibility and protection. In the wake of this bold move, analysts from Bernstein made dramatically optimistic projections both for Bitcoin and MicroStrategy, claiming that Bitcoin may hit $200k by the end of 2025.
According to the analysts, MicroStrategy’s future success can be measured in a similar way because “investors own MSTR to gain an active and leveraged equity exposure to bitcoin. Investors are willing to pay a premium, given the scarcity of bitcoin corporate investment vehicles such as MSTR in listed public markets and the scalability of its active investing strategy.” In other words, more than being just a software provider, MicroStrategy has tied the worth of its business to Bitcoin in a major way. This bullish attitude has shocked much of the world of traditional finance, but nevertheless, the strategy has been paying off to great effect.
In any event, this stock sell-off is yet another example of how Saylor has excelled in the role of public Bitcoin advocate. He has used his own platform to take bold stances on the world of cryptocurrency on many occasions to date, such as his somewhat controversial claim in late May that an Ethereum ETF would ultimately be good for Bitcoin. Expressing no interest in such an asset himself, Saylor nevertheless called it “another line of defense for Bitcoin," as it will “accelerate institutional adoption” and overall remind the world that Bitcoin ETFs have gone from an “unrealistic pipe dream” to a major cornerstone of the financial world in record time. If assets even beyond Bitcoin get the SEC’s green light, there is no possible way to reverse the gains for Bitcoin itself.
Saylor’s leadership as a major buyer and supporter of Bitcoin has already inspired a string of imitators. For example, on May 28th, Semler Scientific announced that it would purchase $40 million worth of Bitcoin. Although it seems even more unorthodox for a medical software company to undertake this sort of gamble, Chairman Eric Semler stated that “I couldn't help but notice what MicroStrategy accomplished. It was a brilliant move on Michael Saylor’s part, and he's obviously proven himself with that strategy.” Semler went on to state that his own investment strategy will look different in the long term, as he emphatically wishes to keep his company’s focus on software development, but nevertheless, he took inspiration from the move.
A much more famous example has, of course, been Metaplanet, a Japanese investment advisor that cast a shadow over the entire Tokyo stock market with its meteoric rise from substantial Bitcoin investment. In a stunning endorsement, Metaplanet cited Japan’s spiraling debt crisis as the real motivation for this move, as Bitcoin seemed a more realistic store of value than the fiat currency of a highly-developed nation. However, Metaplanet showed that their support for Bitcoin was deeper than mere fears of a yen collapse, as the firm even committed a second major purchase this week. Just like MicroStrategy or a great number of anonymous whales, Metaplanet has also chosen to buy the dip.
Major and publicized purchases like this on both the individual and corporate levels can do a great deal to boost confidence in the world’s leading decentralized currency. Bitcoin’s day-to-day performance has always been inextricably tied to a great number of intangibles, and community fears and excitements are a major price driver. Just as skittishness from buyers around the $70k price point has been linked to this week’s downturns, massive purchases from vocal supporters like Michael Saylor can keep optimism high. Bitcoin has always been a chaotic asset, and it will endure with the same optimism despite minor setbacks. With major champions so completely in its corner, it seems clear that Bitcoin has a bright future ahead.
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The Microstrategy raise are senior convertible notes, no?
This is a debt raise, "stock sale" implies a share issue to me.