MicroStrategy sells preferred shares at 20% discount, pushing investor yield to 10%

Odaily News MicroStrategy last week sold preferred stock units, a debt-like security with an 8% coupon. The units sold for $80 apiece, a 20% discount to the market price, effectively pushing the yield to buyers to 10%, a significant concession to get the deal done.
“I can’t remember the last time I saw something this cheap, and obviously there was some resistance to the initial pricing,” said James Dinsmore, a portfolio manager at Gabelli Funds Inc. who focuses on convertible securities.
Still, the deal’s investor-friendly terms allowed the company to raise $563 million, more than double its initial target, as co-founder and chairman Michael Saylor explores multiple capital structures to support his bitcoin buying strategy. The demand shows the market’s appetite for the asset class, which the company said it could use to raise up to $2 billion this quarter, even though it’s more expensive than previous ultra-cheap convertible bonds and par shares.
MicroStrategy did not respond to a request for comment.
“A 10% yield is not cheap capital, but given the profile of the company, I think it’s appropriate,” said David Clott, portfolio manager at Wellesley Asset Management. “And they’re not diluting existing investors like they did with the previous convertible bond offering. It’s a good outcome for them because they’re opening up a new market for raising capital.”
The plan is part of the company's broader plan to raise $42 billion over three years through a combination of stocks and fixed-income securities, with a shift toward the latter expected this quarter. That's partly because the company raised nearly $17 billion through its stock sale program and much less through convertible bonds. The company currently owns about $47 billion in Bitcoin, more than 2% of its total. (Bloomberg)
Earlier news, MicroStrategy announced that it will issue 7,300,000 shares of 8.00% Series A Perpetual Exercisable Preferred Stock ("Perpetual Exercisable Preferred Stock") on January 30, 2025, with a public offering price of US$80.00 per share. The issuance and sale of the Perpetual Exercisable Preferred Stock is scheduled to be completed on February 5, 2025, subject to customary closing conditions.
MicroStrategy estimates that the net proceeds from the offering, after deducting underwriting discounts and commissions and MicroStrategy's estimated offering expenses, will be approximately $563.4 million, and MicroStrategy intends to use the net proceeds from the offering for general corporate purposes, including the acquisition of Bitcoin and for working capital.