MicroStrategy Inc. experienced a drop in shares on Tuesday as the business-analytics software company, known for its involvement in bitcoin, revealed plans to offer convertible debt. This news caused investors to pause after the stock had recently reached a 24-year high.
Factors Contributing to the Decline
The decrease in MicroStrategy’s stock was influenced by a 0.7% decline in bitcoin during early-morning trading on Tuesday, following a significant 34% increase over the previous six sessions, almost reaching its all-time high.
Details of the Convertible Debt Offering
Late on Monday, MicroStrategy announced its intention to offer $600 million in senior notes due in 2030. These notes will be convertible into shares of common stock, cash, or a combination of both. The offering will be private, limited to “qualified institutional buyers.”
MicroStrategy plans to utilize the net proceeds from this debt sale to acquire more bitcoin and for general corporate purposes.
Market Response
The stock saw a 3.4% drop in premarket trading after closing at its highest price since March 17, 2000, the day before. This pullback followed a remarkable 94.1% surge over a six-day winning streak, marking the longest streak in four months and the most substantial gain in three years.
Financial Details and Outlook
MicroStrategy’s market capitalization soared by approximately $11 billion within the past six days, reaching $22.6 billion at the close of Monday’s trading session. The company disclosed in its annual report that by the end of December, it held $2.21 billion in debt.
S&P Global Ratings currently rates MicroStrategy’s credit at CCC+, which places it seven notches below investment grade in speculative territory. Specifics regarding the interest rate, conversion price, and other aspects of the new debt offering are yet to be determined.
Performance Comparison
Year to date, MicroStrategy’s stock has risen by 111.2%, outperforming both bitcoin’s 60.9% increase and the modest gains seen in the SPDR S&P Software & Services ETF XSW (2.5%) as well as the S&P 500 index SPX (7.6%).
