According to BlockBeats, on December 5, Eli Pars, co-CIO of Calamos Advisors LLC, was one of the buyers of the over $6 billion in convertible notes sold by MicroStrategy this year, which are used to continually expand its Bitcoin reserves. Like many other managers, Pars uses these notes for market-neutral arbitrage bets, capitalizing on the significant volatility of the underlying asset.
'Convertible bonds are a way for issuers to monetize stock volatility, and MicroStrategy is an extreme example,' Pars stated, noting that his firm holds over $130 million in MicroStrategy notes, employing both long strategies and arbitrage strategies.
Since October 31, MicroStrategy has purchased approximately $13.5 billion in Bitcoin and issued $3 billion in zero-interest convertible notes, marking the company's fifth bond issuance this year.
These low-interest long-term notes currently have an outstanding amount of over $7 billion, and they can be converted into shares if the stock price exceeds a certain level. Hedge funds are purchasing these notes to deploy their own convertible arbitrage strategies, with firms like AQR Capital Management and Man Group already implementing such strategies elsewhere. This has become one of the hottest strategies on Wall Street this year.
'This transaction is attractive because the implied volatility of convertible bonds is significantly lower than the actual volatility or the implied volatility of options,' Pars said, noting that even in the convertible bond space, MicroStrategy represents a 'very rare opportunity,' especially considering the scale and number of issuances.
MicroStrategy founder Michael Saylor stated in an interview with CNBC: 'Our job is to connect traditional capital markets, which need bonds, fixed income, stocks, or options, with the crypto economy, and we use Bitcoin to achieve this.' (Bloomberg)
