MicroStrategy stock slides after announcing new $400M debt raise to buy Bitcoin
MicroStrategy, the FTSE 250 IT analyst and automation company, announced Tuesday that it has secured a $400 million, two-year credit facility to help it buy up to $200 million of Bitcoin. MicroStrategy said in a filing that the facility will be used to “accelerate its strategic initiatives to provide a comprehensive program of enterprise-grade analytics for the cloud.”
MicroStrategy stock slides after announcing new $400M debt raise to buy Bitcoin. MicroStrategy Inc (NASDAQ: MSCI) announced that it had entered into a $400,000,000 Senior Term Loan Facility agreement to finance a portion of the company’s acquisition of a portfolio of Bitcoin-related companies. The company stated that it will use the proceeds to fund the acquisition of Coin Sciences, Inc. MicroStrategy further noted that it will not be using the proceeds from the transaction to repay any debt that is currently outstanding.
Earlier this week, MicroStrategy (NASDAQ:MSTR) announced that it plans to raise $400 million in debt financing for the purchase of a crypto wallet company called Blocktower Inc. (NYSE:BTU). According to the company, the revenue and earnings from Blocktower will be used to fund the acquisition and will help the company accelerate its growth strategy in the blockchain space.. Read more about when will microstrategy buy more bitcoin and let us know what you think.
A poor balance sheet, excessive debt, and over-reliance on bitcoin (BTC) have already sent MicroStrategy (MSTR) shares down more than 63% since February 2021. However, the business intelligence company has ignored the risks of its exuberant valuations; it now plans to raise additional funds and use the proceeds to buy bitcoins. MicroStrategy announced Monday morning that it plans to raise $400 million in senior secured notes in a private offering […] to acquire more bitcoins. The company already has over 92,000 BTC worth about $3.31 billion at current exchange rates, or nearly 1.5 times its base investment. Dynamics of BTC/USD (blue) versus MSTR (orange) year-to-date. Source: TradingView MSTR fell 2.17% to $469.29 a share Monday after the opening bell in New York. At its peak, it sold for $1,135.
Does not earn money
MicroStrategy has indicated in previous statements that it is building a bitcoin portfolio as insurance against the continued devaluation of major global currencies. But her purchases of bitcoins have not only protected her from the falling US dollar. Note: non-profitable business units. MicroStrategy’s growth rate in net sales is 121.90% by 2020. Source: WSJ MicroStrategy’s research on alternative investments also shows that the company is overly focused on bitcoin, with real estate accounting for less than 0.2% of total investments. The company’s latest quarterly report also shows a weak balance sheet, with a debt-to-equity ratio of 4.55 as of December 31. March 2020 – significant debt of $1.66 billion versus an equity valuation of $0.37 billion. MicroStrategy owned $2.44 billion in assets in March 2021, including $1.947 billion in bitcoins. Source: WSJ This is particularly risky given the volatility of the bitcoin price. MicroStrategy does not generate enough revenue to pay off its debts and relies heavily on bitcoin revenues. The company also plans to raise another $300 million, although the convertible bonds don’t mature until 2028. Juan De La Hoz, a CETF/ETF fund strategist, is concerned about the risk of MicroStrategy’s bankruptcy if bitcoin falls by more than 50% in the future, recalling the massive declines of the leading cryptocurrency in 2014 and 2018. The analyst added that MicroStrategy will likely liquidate its bitcoin holdings to avoid bankruptcy. Hawes said he would not invest in leveraged cryptocurrencies, nor would he invest in any company that would – a phrase that speaks to his extremely bearish attitude toward MicroStrategy and bitcoin. It’s too risky, you could lose everything, and I wouldn’t want to take that risk. Bitcoin prices slept through MicroStrategy’s morning announcement. BTC/USD continued to trade sideways, holding support above $36,000.MicroStrategy (NASDAQ: MSTR) stock is down about 5% today after the company announced plans to raise $400 million in debt from the capital markets to finance the purchase of a majority stake in the San Francisco-based cryptocurrency wallet startup BitGo.. Read more about microstrategy news bitcoin and let us know what you think.