By Medha Singh
(Reuters) – Shares of MicroStrategy dropped about 5% in premarket trading on Tuesday after the software firm announced plans to raise capital through a $600 million private offering in convertible notes that it would use to buy more bitcoins.
The stock of the listed company with the biggest bitcoin holding hit a 24-year high on Monday, as the world’s largest cryptocurrency climbed closer to 2021 record high.
With the latest offering, MicroStrategy joined a slew of companies raising capital through convertible bond deals, taking advantage of an environment of high interest rates and surging stock prices.
Last month, MicroStrategy bought about 3,000 bitcoins, taking its total holdings to 193,000 bitcoins — bought at an average price of $31,544 apiece as of Feb. 25.
At the current bitcoin price of $66,850, its holdings are worth $12.90 billion, according to Reuters calculations, nearly double the price at which they were bought.
The company’s valuation stood at $22.64 billion up to the last closing price, LSEG data showed.
“Maybe MicroStrategy has found the perpetual money trade, repeatedly sell debt, and invest the proceeds in the asset you own, further fueling its rally,” said Michael O’Rourke, chief market strategist at JonesTrading.
MicroStrategy began buying bitcoin in 2020 to focus on “HODLer” strategy, which involves hoarding but not easily selling crypto as revenue from its software business eased in the past two consecutive years to $496.23 million in 2023.
The four brokerages covering the company rate it “buy” or higher.
Publicly listed companies together hold around $18.5 billion of bitcoin, data from the Bitcoin Treasuries website shows.
(Reporting by Medha Singh in Bengaluru; Editing by Shinjini Ganguli)
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