MicroStrategy is a leading crypto-friendly enterprise specializing in providing blockchain-oriented solutions to its diverse global clientele. Other than this formal introduction, MicroStrategy is also known for being among the first pioneers to adopt and praise the idea of decentralization, as it has bought more than 90k Bitcoin to date and plans on doing that once again. Most of the time that MicroStrategy has made the purchase, it was either a crypto crash or bearish trends correcting the price of Bitcoin, so a very smart and obvious strategy to pick for buying Bitcoin. But this time around, the strategy that MicroStrategy has might not be that subtle at all.
MicroStrategy is Alright Paying a Heavy Debt if it Means more Bitcoin Acquisition
MicroStrategy intends to offer $500 million of the senior secured notes at an annual interest rate of 6.125%; this is to be offered in a private offering and only to the qualified institutional buyers so it can have enough money to buy new Bitcoin. It might be the first time that junk bonds will be used for the acquisition of cryptocurrency. The annual interest rate of 6.125% is a high coupon placed against the usual 3-4% trading taking place in the high yield market for the said senior secured notes.
Even though MicroStrategy has a healthy balance sheet, the move made here is not in any term or way a healthy decision for MicroStrategy. In simpler terms, if MicroStrategy’s CEO Michael Slayer moves on with this bizarre financial deal, the market is going to charge him a ton of money, and he is alright to pay it at the aforementioned annual interest rate.
This is the kind of deal, according to a senior analyst, where everything gets something and is happy; such as Slayer will be able to buy Bitcoin out of the deal, and the people who are going to buy these senior secured notes are happy to do so because these are associated with a direct Bitcoin exposure. There is no thought process surrounding this deal or how it might pan out, but one thing is for sure that MicroStrategy will continue with its out-of-the-blue Bitcoin purchases.