Strategy, formerly branded MicroStrategy, will continue its fundraising efforts. The company set up a new prospectus for raising $21B through perpetual strike preferred stock.
Michael Saylor’s Strategy, formerly known as MicroStrategy, will continue with its fundraising. The latest prospectus outlines the plans to raise $21M through a perpetual strike preferred stock. The new stock will offer perpetual dividends with no maturity date, sharing the company’s profits. The offer will be presented at $92.40 per share. The upcoming sale will also be known as the ATM program. The proceeds will be used for general purposes, operating capital, and partially for acquiring more Bitcoin (BTC).
Currently, Strategy owns BTC valued at over $41B, acquired after previous large-scale fundraising. The new $21B raise could, in theory, expand the corporate treasury to 750,000 BTC. However, the funds may not all go toward BTC purchases, even at their lower price.
The recent announcement tracks the earlier strategy of raising over $42B in capital over the next three years. If the ambitious placement succeeds, Strategy will speed-run the strategy with over 50% of the funds.
Strategy did not mention an explicit BTC buying plan
Strategy did not explicitly mention its BTC buying strategy in the prospectus, only mentioning Bitcoin in general as a risky novel asset. The prospectus is open about big fluctuations in the price of BTC affecting the ability to repay claims on stocks.
Strategy has expanded its activities to a more general company, still branded with Bitcoin’s logo and colors. The exact buying strategy for more BTC remains uncertain amid the latest market downturn. Strategy acquired a total of 499,096 BTC, though its latest purchases have been relatively smaller.
The buying stopped after the company used up its latest fundraising from convertible stock, raising issues of liquidity and the ability to redeem all holders. For now, Strategy is in the money based on the average purchase price of BTC. However, the pace of acquiring new coins has slowed down significantly.
After the new issue, Strategy will have 249,778,923 of its Class A common stock shares outstanding. The new preferred shares will be convertible to Class A common stock under conditions to be specified in the future.
Strategy’s fundraising becomes more aggressive
Despite the BTC bull run, Microstrategy keeps adding more aggressive fundraising strategies. The fundraising started with common stock, then shifted to convertible shares that could become company debt. Skeptics view the latest move as a sign of desperation, which may also cause skewed expectations for the price of BTC.
The latest preferred shares offer relies on its outsized dividend promise of 8%, an extraordinary offer for this type of asset. The shares are convertible to common stock and risk causing dilution.
Strategy warned that raising $21B may take time and extend over months. The current sale will start based on a prospectus filed with the US Securities and Exchange Commission. The issuance and sale will depend on market conditions, as BTC turned down to a lower range, putting more pressure on the dedication to holding BTC for the long term.
After the announcement, the MSTR (STRK) shares traded at $287.18, closer to the upper range for the past six months. MicroStrategy’s buying and subsequent rebranding were one of the major factors in this BTC bull cycle. However, the downturn continues to threaten the MSTR stock structure.
BTC buying continued even after the market peak, and Strategy bought favorably for the last time in November 2024. Without a new all-time high for BTC, demand for the new shares may be even lower.
The other big question for the new share issue is how the company would be able to honor up to $2B in dividends for the stock issuance. MicroStrategy had a net loss of $1.16B for the whole of 2024 and has relatively small cash flows. The company uses fundraising to cover previous debts, which worked while BTC was climbing. However, relying on a bull market and pumping the BTC price with more buying can end up unraveling both MSTR shares and the BTC market price.
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