MicroStrategy Launches Convertible Preferred Stock Offering

Business intelligence company MicroStrategy has officially launched its convertible preferred stock offering, aimed at institutional investors and select retail investors.

Offering Details

Called STRK, MicroStrategy will offer 2.5 million shares of its Series perpetual strike preferred stock. The perpetual preferred stock will have:
– A liquidation preference of $100 per share
– Cumulative dividends at a fixed rate determined at the offering’s pricing
– Regular dividends payable quarterly if declared by the board

Intended Use of Proceeds

MicroStrategy plans to use the net proceeds for general corporate purposes, including the acquisition of Bitcoin. Recently, the company purchased another 10,107 BTC for about $1.1 billion, bringing its total holdings to 471,107 BTC, valued at over $46 billion.

Features of Preferred Stock

Unlike bonds, perpetual preferred stock:
– Has no maturity date or mandatory redemption timeline
– Pays fixed dividends indefinitely as long as MicroStrategy is operational

Investors may convert their shares into Class A common stock under certain conditions, potentially receiving cash instead of fractional shares. MicroStrategy has the option to buy back outstanding preferred stock for cash if the value drops below 25% of the original offering amount or under certain tax events.

Shareholder Rights

In the event of a “fundamental change,” shareholders can require MicroStrategy to repurchase their shares at the liquidation value plus any unpaid dividends.

Analyst Mark Palmer describes these securities as offering preferred investors an embedded, indefinite call option on a highly volatile cryptocurrency tied to the company’s value.

Investor Expectations

During a recent investor meeting, MicroStrategy co-founder and executive chairman Michael Saylor stated that the company aims to provide investors with returns and volatility at factors of 1.5x those of Bitcoin itself.