MicroStrategy announces a private offering of $875 million of convertible senior notes

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Microstrategy announced the pricing of its offering, amounting to $875 million of convertible senior notes at an annual rate of 0.625%. According to the announcement, the offerings will be available for purchase in a private offering only accessible by qualified institutional buyers as required by the Securities Act of 1933.

Microstrategy stated its intentions to offer its unsecured senior obligations as convertible senior notes that will bear an interest rate of 0.625% per annum and mature on September 15th, 2028. 

The strategy stated that the maturity date will only change if the notes are repurchased earlier than the maturity date, redeemed, or converted according to the existing terms. The offer will close on September 19, 2024, following normal closing conditions.

Microstrategy may redeem all or part of the notes

The interest rate will be payable in two arrears every year. The first arrears will be due on March 15, and the second arrears will be due on September 15, with the first arrears beginning on March 15, 2025. The terms indicate that Microstrategy may redeem all or part of the notes for cash on or after December 20, 2027. 

The terms dictate that the redemption price will equal 100% of the principal amount redeemed. The redeemed amount will also attract any unpaid interest accrued till the immediate day before the redemption date. If MicroStrategy decides to redeem a portion of the outstanding notes, the total principal amount must be at least $75 million. These notes must not be subject to redemption during the applicable redemption notice date.

The notes will be convertible to cash or MicroStrategy class A stock

On 15th September 2027, holders of the notes may require the entity to repurchase the notes at the repurchase price of 100% of the principal amount plus any unpaid interest, excluding the date of repurchase. The notes will be convertible to cash, MicroStrategy class A stock, or a cocktail of both, depending on the company’s preference.

Before March 15th, 2028, conversions will only be possible under specific circumstances. After that date, conversions will be approved at any time before the actual maturity date. Microstrategy announced that the initial conversion rate is 5.4589 shares for $1,000 of the note’s principal. The starting conversion price is about a 40% premium from the average stock price of $183.19 on September 17, 2024. 

Microstrategy aims to raise $864.1 million from the offering. The $500 million generated from the proceeds will be used to redeem Senior Secured Notes, fund other corporate purposes, and purchase additional Bitcoin. 

On September 16, the company announced a redemption notice to redeem the senior secured notes on September 26, 2024. Microstrategy intends to redeem the notes for 103.063% of their value and interest while freeing approximately 69,080 bitcoins used as collateral.

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