MicroStrategy uses a small reserve of Bitcoin as collateral to issue stock or zero-coupon debt, in order to purchase a large amount of Bitcoin through simple arbitrage. The company announced in October that it plans to raise $42 billion using these methods over the next three years and is accelerating toward this goal. Bernstein analysts believe that 'MicroStrategy is playing a Bitcoin leverage game.' Analysts noted that the longer debt maturities provide the company with some buffer against immediate repayment or Bitcoin price volatility. Furthermore, even if MicroStrategy has to issue stock to repay convertible bonds, the dilution effect of these stocks on the company's equity is limited. 'MicroStrategy increasingly relies on issuing stock to buy Bitcoin, but when it opts for convertible bonds, bond purchasers can obtain the option to convert them into company stock at a certain price, which is almost equivalent to a call option.' (foxaraby)

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