The Daily Dive #005 - Writing The Corporate Bitcoin Accumulation Playbook
“MicroStrategy Launches “At the Market” Securities Offering for Flexibility to Sell Up to $1 billion of its Class A Common Stock Over Time $MSTR” - Michael Saylor, via Twitter
MicroStrategy has been highlighted quite often in the Daily Dive recently, but the company’s announcement of a $1 billion equity offering that is able to be issued at the discretion of the executives of the company is yet another example of the company blazing the trail as a company on a bitcoin standard in public capital markets.
Michael Saylor and MicroStrategy are writing the playbook for corporate bitcoin accumulation at this very moment, and the mainstream media and participants in the legacy financial system are in disbelief.
Let’s first review a summary of the moves MicroStrategy has made to acquire as much bitcoin as possible.
08/11/20 - MicroStrategy Adopts Bitcoin as Primary Treasury Reserve Asset
08/11/20 - MicroStrategy Announces Commencement of Modified Dutch Auction Tender Offer to Purchase Up to $250 Million of Its Class A Common Stock
12/07/20 - MicroStrategy Announces Proposed Private Offering of $400 Million of Convertible Senior Notes
12/11/20 - MicroStrategy Completes $650 Million Offering of 0.750% Convertible Senior Notes Due 2025
12/21/20 - MicroStrategy Announces Over $1B in Total Bitcoin Purchases in 2020
02/16/21 - MicroStrategy Announces Proposed Private Offering of $600 Million of Convertible Senior Notes
02/20/21 - MicroStrategy Completes $1.05 Billion Offering of Convertible Senior Notes Due 2027 at 0% Coupon and 50% Conversion Premium with Bitcoin Use of Proceeds
02/24/21 - MicroStrategy Acquires Additional 19,452 Bitcoins for $1.026 Billion
06/07/21 - MicroStrategy Announces Proposed Private Offering of $400 Million of Senior Secured Notes
06/14/21 - MicroStrategy Completes $500 Million Offering of 6.125% Senior Secured Notes Due 2028 with Bitcoin Use of Proceeds
06/14/21 - MicroStrategy Launches “At the Market” Securities Offering for Flexibility to Sell Up to $1 billion of its Class A Common Stock Over Time
The first announcement on August 11th was announcing the company’s transition to a bitcoin standard, followed by generously announcing that the company would buy out any shareholders at a premium if they did not like the strategy.
Shortly after, on December 7th, the company announced a proposed private offering of $400 million of convertible senior notes. This offering was oversubscribed and ended up being completed for a total of $650 million of senior notes due in 2025, with a 0.750% coupon.
With this move, MicroStrategy borrowed over half a billion dollars at a negative real interest rate, to buy the hardest money the world has ever known. With the notes being convertible, the company also has the option of giving bond holders equity in the business if the principal is not repaid.
The convertible equity offering was lucrative enough for creditors to buy MicroStrategy’s notes with a near 0% coupon.
In an effort to keep this Daily Dive short and digestible, we will gloss over some of the key events, but the full archive of MicroStrategy’s news and press release archive can be found here.
The Genius of the “At The Market” Securities Offering
MicroStrategy’s latest announcement is just the latest showing in the masterclass the company is conducting in corporate finance on a bitcoin standard.
The move is significant for multiple reasons:
1) Equity dilution on the open market to acquire more bitcoin gives shareholders less ownership of the company, but more bitcoin per share. Shares of MicroStrategy gain additional ownership of the bitcoin network, but conversely see a decline in proportional ownership of the company’s enterprise software business.
2) The move gives the company the ability to protect the bitcoin market on the downside and/or take advantage of misallocations in the bitcoin price or MicroStrategy’s equity price. An example of this would be when shares of MicroStrategy touched above $1,300 while the price of bitcoin was trading at the $45,000 level. As the price of bitcoin continues to rise in the months and years that follow, the market cap of MicroStrategy will rise, giving the company a bigger weight in equity indices, which subjects the company to more passive investing flows. In a virtuous cycle, MicroStrategy can use this strategy to obtain an absolutely massive amount of bitcoin and remain one of the biggest players in the market.
Michael Saylor and MicroStrategy are actively writing the playbook for corporations on a Bitcoin Standard, and their intentions could not be any more clear.
Acquire Bitcoin at all costs, and use the artificially suppressed cost of capital to do it.
When all is said and done, the corporate strategy conducted by MicroStrategy will very likely be seen as rational and prudent in a world of capital markets manipulated at the whims of global central banks.