$800 million instead of $500 million - MicroStrategy wants to buy even more Bitcoin

After MicroStrategy announced its intention to issue convertible bonds for 500 million US dollars yesterday, the specifications for the project were released today. These revealed that the Bitcoin-based company would like to raise an additional 200 to 300 million US dollars to buy more Bitcoin.

MicroStrategy now plans to raise $700 million in the market through the issuance of convertible notes "for the purchase of additional Bitcoin and for general corporate purposes". MicroStrategy is also granting initial purchasers the option to purchase additional notes for an aggregate amount of $100 million within 13 days of the June 17th issuance.

The proceeds from the borrowing will allow the company to purchase up to USD 786 million of additional Bitcoin, subject to demand.

MicroStrategy estimates that the net proceeds from the sale of the notes will be approximately $687.8 million (or approximately $786.0 million if the initial purchasers exercise their option to purchase additional notes in full), after deducting the initial purchasers' discounts and commissions and estimated offering expenses payable by MicroStrategy.
_{From the press release}

The convertible notes due 2032 will have an annualized interest rate of 2.25 percent. One $1,000 note will be exchangeable for 0.4894 MicroStrategy shares at maturity. This corresponds to an implied share price of over 2,000 US dollars per share, i.e. around 35 percent above the current price of around 1,500 US dollars.

As the interest rate, as is usual with convertible bonds, is below the prevailing market interest rate, the buyers are primarily speculating on a higher share price in the future by purchasing the West paper - with limited risk, as they can only get back the loan amount including interest in the event of weaker performance, provided the company is still solvent by then.

A renowned analyst firm is currently also assuming that MicroStrategy shares will continue to generate a strong return in the coming years. Bernstein sees the company founded by Michael Saylor as an outperformer in the coming months and has set a price target of USD 2,890.

The Bernstein report also states that the convertible bond strategy gives the company enough time to exploit Bitcoin's upside potential without being exposed to the risk of liquidating its Bitcoin positions. The analyst firm forecasts a price of 200,000 US dollars for Bitcoin in the coming year. The analysts also believe that a price of USD 1,000,000 per Bitcoin by 2033 is likely.