MicroStrategy has announced its intention to offer $500 million in convertible senior notes due in 2032.
The private offering to qualified institutional buyers would adhere to Rule 144A of the Securities Act 1933 and is “subject to market conditions and other factors.”
“The notes will be unsecured, senior obligations of MicroStrategy and will bear interest payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2024. The notes will mature on June 15, 2032, unless earlier repurchased, redeemed or converted in accordance with their terms.”
Proceedings and strategic aims
According to a press release, the net proceeds will primarily be used to acquire additional Bitcoin and for “general corporate purposes.”
Despite being subject to market conditions, this move aligns with MicroStrategy’s long-term goal of using BTC as its treasury reserve asset.
Private offering details
The firm expects to grant initial purchasers of notes the option to buy a further $75 million in “aggregate principal amount of the notes.”
“If MicroStrategy redeems fewer than all the outstanding notes, at least $75 million aggregate principal amount of notes must be outstanding and not subject to redemption as of the relevant redemption notice date.”
The press release explained that “the interest rate, initial conversion rate, and other terms of the notes will be determined at the time of pricing of the offering.“
“MicroStrategy expects that the reference price used to calculate the initial conversion price for the notes will be the U.S. composite volume weighted average price of MicroStrategy’s class A common stock from 9:30 am through 4:00 pm EDT on the date of pricing.”
Regulatory considerations
According to the press release, the notes would be offered and sold to qualified purchasers under Rule 144A of the Securities Act 1933.
This would mean that the convertible senior notes and any convertible shares of MicroStrategy’s class A common stock will not be officially registered under the Securities and Exchange Commission (SEC).
Not being registered under the SEC means they cannot be sold or bought in public markets without meeting specific legal conditions.