MicroStrategy has announced the pricing of a private offering for $875 million of convertible senior notes with an interest rate of 0.625% per annum.
These notes will be available exclusively to qualified institutional buyers under the Securities Act 1933. Subject to customary closing conditions, the offering is expected to close on September 19, 2024.
Details of the convertible senior notes
The convertible senior notes represent unsecured senior obligations of MicroStrategy, carrying an interest rate of 0.625% annually. They will mature on September 15, 2028, unless they are redeemed, repurchased, or converted earlier based on the specified terms. The interest payments will be made semi-annually, with the first payment scheduled for March 15, 2025, and subsequent payments due every September 15 and March 15 after that.
MicroStrategy Announces Pricing of Offering of Convertible Senior Notes $MSTR https://t.co/xIsCTvCBgH
— Michael Saylor (@saylor) September 18, 2024
MicroStrategy has set a redemption provision, allowing the company to redeem all or part of the notes for cash on or after December 20, 2027. The redemption price will equal 100% of the principal amount and any accrued but unpaid interest. If it chooses to redeem only part of the notes, the company must redeem a minimum of $75 million in principal amount.
Conversion terms and conditions
The senior notes will be convertible into either cash, MicroStrategy’s class A common stock, or a combination of both, based on the company’s discretion. Under specific conditions, noteholders may demand conversion on or after March 15, 2028. Before this date, conversions will only be allowed under certain circumstances. After March 15, 2028, noteholders can convert their notes before maturity.
The initial conversion rate is 5.4589 shares for every $1,000 of the note’s principal, representing a conversion price that is 40% higher than the average stock price of $183.19 on September 17, 2024. On September 15, 2027, holders may request MicroStrategy to repurchase the notes at 100% of their principal amount plus accrued but unpaid interest.
Use of proceeds and additional Bitcoin purchase plans
MicroStrategy aims to raise approximately $864.1 million from this offering. The company plans to allocate $500 million from the proceeds to redeem its Senior Secured Notes, fund other general corporate purposes, and expand its Bitcoin holdings. In a related move, MicroStrategy issued a redemption notice on September 16, 2024, announcing its intention to redeem the Senior Secured Notes on September 26, 2024. The notes will be redeemed at 103.063% of their principal value, freeing up 69,080 bitcoins held as collateral.
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