CandleFocus

The math behind MicroStrategy’s bitcoin bet

MicroStrategy, a software company, saw a surge in trading on US stock markets and a rise in its stock price after announcing it owns 331,200 bitcoins worth over $32 billion. The company plans to buy more bitcoins and has announced financing to purchase tens of billions of dollars more. MicroStrategy is using dilution and debt to raise capital for its bitcoin acquisitions, with the proceeds from share issuances and bond sales used to buy more bitcoin. The company's strategy has been successful so far, with shareholders not reacting negatively to the dilution and the price of its stock rallying. Its bonds also provide an opportunity for bondholders to convert the bonds into common stock. However, there is a risk if the price of bitcoin or MicroStrategy's stock declines, as the bonds are unsecured and not collateralized.

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