Microstrategy Sells 400 Million in Bond to Purchase Bitcoin
MicroStrategy recently made the headlines with its announcement that it will borrow 400 million dollars from users by selling its secure bond notes, which are expected to reach maturity term in 2028. At present, it contains 92,079 Bitcoins within its treasury; however, it will invest Bitcoins worth that extra 400 million in a separate subsidiary firm called MicroStrategy.
Since Bitcoins are currently rated at 33,755 dollars, the company can therefore purchase 11,850 BTCs. However, this is not the first time that they have sold bonds to amass the funds needed for purchasing Bitcoins. Earlier they have sold their convertible notes.
The Virginia-based company’s strategy is as follows: The sale of bonds will help prospective investors purchase debts from the creditor business to guarantee that their principal and interest will not be forfeited. Thus, the more organizations buy bonds from MicroStrategy, and the more the latter can raise capital for purchasing the cryptocurrency, which they have predicted will increase in price.
Despite MicroStrategy being one of the premier institutions in the trend of investing in Bitcoins, its CEO Michael Saylor has attracted only the scathing criticism of experts for his decision. For instance, Marc Litchtenfeld, the Chief Income Strategist at Oxford Club, has observed that the company is not using the borrowed 40 million for any concrete growth or to acquire any new long-time profit worthy asset, but to make speculations on an extremely volatile asset. He has openly put to question MicroStrategy’s business, asking whether it is only acting as a proxy for Bitcoin, funded entirely by borrowed finances.
It was the drop in stocks during the fall of Bitcoin’s price that primarily led to this decision by the firm. Still, some speculate that their clandestine policies of accounting might have also affected them negatively. The firm has advertised its offer all through Tuesday, and one can expect that they will announce the pricing once the deals are finalized. However, its wager on Bitcoin is quite different given at the current rate in comparison to the crypto coin’s forever highest rate at 64,000 dollars.