Key Points:
- MicroStrategy has just boosted its “Stretch” stock offering from $500 million to $2.8 billion.
- It plans to use the proceeds from this stock offering to fund additional Bitcoin purchases to reach its 1 million BTC goal.
- Experts warn that the company’s debt-heavy strategy may backfire in a market downturn.
MicroStrategy has once again made headlines with its Bitcoin strategy. According to Bloomberg, the company has increased its latest preferred stock offering. It is known as Stretch (STRC), and it went from $500 million to $2.8 billion.
The proceeds from this sale will be used to buy even more Bitcoin. It will also help the firm reach its target of holding 1 million BTC.
The company, led by Executive Chairman Michael Saylor, already holds over 607,000 BTC, worth over $72 billion. And with this new fundraising round, the firm has no intention of slowing down.
The Latest Move of MicroStrategy to Grow Bitcoin Holdings
The Stretch offering stands as MicroStrategy’s most flexible stock issuance to date. Unlike previous offerings, this preferred stock carries a monthly variable 9% annual dividend.
The company hopes this approach will help it adapt to market conditions while still funding its aggressive Bitcoin buying spree.
Initially, MicroStrategy planned to raise $500 million through the Stretch offering by selling 5 million shares at $100 each. However, high investor interest has pushed the company to increase the size to $2.8 billion.
These investors’ names include Morgan Stanley, Barclays, and TD Securities. Shares are now expected to be priced at $90, a discount to attract more buyers.
This new offering is part of what MicroStrategy calls its “42/42 plan”: Its long-term effort to raise $84 billion and accumulate more Bitcoin as the top corporate BTC holder.
Why MicroStrategy Keeps Buying Bitcoin?
MicroStrategy’s business model has gravitated almost entirely toward Bitcoin. The company was once known as a software company, but now it acts more like a Bitcoin investment vehicle.
Michael Saylor believes Bitcoin is “digital gold” and is a superior asset for long-term value preservation. The numbers speak for themselves, too.
Since May, MicroStrategy has made nine separate Bitcoin purchases. This includes a massive buy of 13,300 BTC in June. The firm has added more than 51,000 BTC in just two months, an investment worth over $5.4 billion.
Bitcoin recently hit a new all-time high above $118,000, and the timing may seem perfect. However, the company is still pressing forward even as prices cool.
A Risky Bet? Some Experts Think So
Not everyone is convinced that MicroStrategy’s Bitcoin-heavy approach is wise. While many investors admire the company’s vision, some analysts warn that the debt-fueled strategy could become a significant problem.
According to JPMorgan, these aggressive stock offerings increase leverage in the system. If Bitcoin’s price drops strongly from here, the firm may be forced to sell assets, repay debt, or even face insolvency.
As MicroStrategy continues issuing more preferred stock, it dilutes shareholders. This is especially true with variable dividend payouts, which are subject to change based on performance. If Bitcoin stalls or enters a harsh bear market, the risk to equity holders could grow quickly.
Still, Saylor appears to be confident. In his view, short-term volatility is worth the long-term gain. He believes Bitcoin will eventually outperform every other asset class, and he’s betting MicroStrategy’s neck on it.
Institutional Interest in Crypto Is Growing
MicroStrategy isn’t the only firm buying more and more digital assets. Since the approval of several spot Bitcoin ETFs earlier this year, interest from institutional investors has been on the rise.
However, what sets MicroStrategy apart is its direct ownership strategy. Instead of offering funds or ETFs, the company buys and holds Bitcoin on its balance sheet. This makes it one of the purest corporate plays on Bitcoin today.
Considering the expanded Stretch offering, MicroStrategy is pointing out once again that it plans to lead the pack, not follow it.