• Michael Saylor’s Strategy launched and upsized a new preferred stock offering from $500M to $2.8 billion.
• The ‘Stretch’ security promises a hefty 9% annual payout with no end date and a flexible, adjustable dividend.
• The deal is the latest in Saylor’s years-long effort to transform Strategy into a financial vehicle to acquire Bitcoin.

Michael Saylor’s relentless quest to transform his company, Strategy, into a Bitcoin-acquiring financial juggernaut has reached a new level of ambition.

The firm has launched and then promptly upsized a novel preferred stock offering, raising a staggering $2.8 billion in a deal that further showcases Saylor’s prowess in the capital markets and the insatiable investor appetite for exposure to the booming crypto market.

As crypto prices continue their upward march, Saylor’s Bitcoin holding company, Strategy, has once again demonstrated its unique ability to tap into market enthusiasm.

The company priced a new kind of security on Thursday, which it has dubbed “Stretch.” This offering promises buyers a hefty 9% annual payout with no specified end date, an unusual feature in the often-arcane world of preferred stock.

Initially planned as a $500 million deal, the offering was upsized to $2.8 billion due to overwhelming demand, according to a person familiar with the transaction who asked to remain anonymous.

This move is the latest, and perhaps most audacious, demonstration of Saylor’s Wall Street wizardry in his years-long effort to pivot a middling software firm, formerly known as MicroStrategy, into a corporate entity singularly obsessed with one goal: raising as much money as possible to acquire as many Bitcoin as possible.

At last count, the company’s hoard stood at some 600,000 coins, worth approximately $70 billion.

“This is not the first financial engineering initiative by Strategy,” noted Campbell Harvey, a professor at Duke University. “In any situation where your company is worth far more than fundamental value, you raise money.”

Since Strategy’s first groundbreaking Bitcoin purchase in 2020, Saylor has employed a diverse range of financial instruments, including selling equity, issuing various types of debt, and layering multiple stacks of preferred shares.

In doing so, he has not only amassed a colossal Bitcoin treasury but has also inspired a fleet of imitators, spurring a new industry of public companies dedicated to the so-called “treasury strategy” of buying and holding cryptocurrencies.

The ‘Stretch’ security: a new twist on an old theme

Many of the previous financial instruments that have fueled Strategy’s rise have proven to be more popular than expected, but even against that backdrop, the demand for “Stretch” was notable.

The company’s common shares rose 0.5% on Wednesday and are up an impressive 43% for the year.

The new “Stretch” shares occupy a specific place in Strategy’s complex and unusual capital structure.

They sit above the company’s common stock and its other preferred shares—which carry creative names like “Strike” and “Stride”—but remain subordinate to its convertible bonds and another preferred stock known as “Strife.”

A key feature that distinguishes “Stretch” from earlier offerings is its flexible dividend. Unlike a fixed payout, this security allows Strategy to tweak the dividend rate.

Each month, the firm will set a new payout rate with the aim of keeping the share price near the $100 mark, raising or lowering the dividend as needed to maintain this target. It’s a unique combination of a dynamic pricing model and a trust exercise, and a clear reminder that in the world of financial engineering, Strategy often creates its own rules.

Diminishing returns? A discount to win over investors

While this flexibility may appeal to Saylor’s large and dedicated fan base of retail investors, it also introduces a new layer of uncertainty into an already complex capital structure.

There are some signs that Saylor’s tactics may be facing somewhat diminishing returns, as the value of the company, relative to the Bitcoin it owns, has reportedly gone down.

In a move to win over investors for its latest offering, Strategy offered the “Stretch” shares at a discount. The shares, which are set to carry an initial dividend of 9%, were sold for $90 each.

This was at the bottom of the marketed range and represents a discount to their face value of $100, according to the person familiar with the deal.

Despite the discount, the outsized demand for the deal provides the latest and most powerful sign of both Saylor’s avid following and the continued speculative fervor that is running through the financial markets.

According to a previous Bloomberg report, major financial institutions including Morgan Stanley, Barclays Plc, Moelis & Co., and TD Securities worked on this landmark deal.

Michael Saylor, executive chairman of MicroStrategy, on Wednesday said the company has upsized convertible senior notes offering from $700 million to $875 million. This will help the company to buy even more Bitcoin. Meanwhile, MSTR stock price fell over 1% in response today.

Michael Saylor Upsizes MicroStrategy Debt Offering to $875 Million

Virginia-based business intelligence firm MicroStrategy is now looking to raise $875 million through the sale of convertible senior notes at an interest rate of 0.625% per annum, MicroStrategy announced on September 18.

Michael Saylor took to X to reach out to the wider crypto community about upsizing the notes offering to buy even more Bitcoin. On Monday, the company announced plans to offer a private offering of $700 million in convertible senior notes.

MicroStrategy Announces Pricing of Offering of Convertible Senior Notes $MSTR https://t.co/xIsCTvCBgH

— Michael Saylor (@saylor) September 18, 2024

The company estimates that the net proceeds from the sale of the notes will be approximately $864.1 million, of which some will be used for buying Bitcoin and other general corporate purposes. The proceeds can even reach $997.4 million if the initial purchasers use the option to purchase additional notes. The conversion rate for the notes is 5.4589 shares of MicroStrategy class A common stock per $1,000 principal amount of notes.

The move comes after the company acquired 18,300 BTC worth $1.11 billion. MicroStrategy’s total BTC holding has increased to 244,800 BTC valued at $9.45 billion, which accounts for $38,585 per BTC. The firm has achieved a BTC Yield of 4.4% QTD and 17.0% YTD. The current profit is $4.71 billion.

MSTR Stock Dips Amid Uncertainty Ahead of Fed Rate Cuts

The MicroStrategy shares were trading around $129.38 at the time of writing, down nearly 1.44%. MSTR stock price closed 2.42% lower at $131.27 on Tuesday. Moreover, the price is down 3% in a month.

Meanwhile, BTC price pared earlier gains and currently trades at $59,875. The 24-hour low and high are $58,901 and $61,316, respectively. Furthermore, the trading volume has increased by 35% ahead of the expected 50 bps interest rate cuts by the U.S. Federal Reserve.

In the derivatives market, total BTC futures open interest increased 2% in the last 24 hours, indicating a slight buying activity among futures traders. As per Coinglass data, the 530.99K BTC OI is valued at $31.92 billion.

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Varinder Singh

Varinder has 10 years of experience in the Fintech sector, with over 5 years dedicated to blockchain, crypto, and Web3 developments. Being a technology enthusiast and analytical thinker, he has shared his knowledge of disruptive technologies in over 5000+ news, articles, and papers. With CoinGape Media, Varinder believes in the huge potential of these innovative future technologies. He is currently covering all the latest updates and developments in the crypto industry.

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