MicroStrategy sells preferred stock at a discount of 20%, pushing investor returns to 10%

Odaily Planet Daily News: MicroStrategy sold preferred stock units last week, which are debt like securities with a coupon rate of 8%. These stocks were sold at a price of $80 per share, 20% lower than the market price, effectively pushing the buyer's yield up to 10%, which was a significant concession in completing the transaction. James Dinsmore, a portfolio manager at Gabelli Funds Inc. specializing in convertible securities, said, "I don't remember the last time I saw something priced so low, obviously there was some resistance to the initial pricing Nevertheless, the investor friendly terms of the transaction enabled the company to raise $563 million, more than double its initial target, as co-founder and chairman Michael Saylor is exploring multiple capital structures to support his Bitcoin purchase strategy. This demand indicates market interest in this asset class, and the company states that although it is more expensive than previously issued ultra-low interest convertible bonds and parity stocks, it can raise up to $2 billion in funding this quarter. MicroStrategy did not respond to our request for comment. A 10% yield is not cheap capital, but considering the company's profile, I think it's appropriate, "said David Clott, portfolio manager at Wellesley Asset Management." And they won't dilute the equity of existing investors like previous convertible bond issuances. This is a good result for them because they have opened up a new financing market 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 an expected shift towards the latter this quarter. Part of the reason is that the company raised nearly $17 billion through its stock sale plan, while much less was raised through convertible bonds. The company currently holds approximately $47 billion in Bitcoin, accounting for over 2% of its total. (Bloomberg) Previously, MicroStrategy announced that it will issue 7300000 shares of 8.00% Series A perpetual exercise preferred stock ("perpetual exercise preferred stock") on January 30, 2025, at a public offering price of $80.00 per share. The issuance and sale of perpetual exercise preferred shares are scheduled to be completed on February 5, 2025, subject to customary closing conditions. MicroStrategy estimates that after deducting underwriting discounts and commissions, as well as MicroStrategy's estimated issuance expenses, the net amount obtained from the issuance is approximately $563.4 million. MicroStrategy intends to use the net amount from the issuance for general corporate purposes, including the acquisition of Bitcoin and working capital.