MicroStrategy, which bills itself as a Bitcoin development company, announced that it will issue up to $2 billion in perpetual preferred stock as it continues to strengthen its balance sheet and acquire more Bitcoin.
Micro-strategy launches "21/21 Plan"
MicroStrategy launched the “21/21 Plan” in October 2024 and plans to raise US$42 billion within three years, including US$21 billion in equity capital and US$21 billion in fixed income capital. In order to accelerate the realization of this goal, MicroStrategy announced the convening of a special shareholder meeting and made some proposals for the issuance of new shares as follows:
Increase authorized Class A shares from 330 million to 10.33 billion shares to support future capital raises
Increase authorized preferred stock from 5 million to 1.005 billion shares to expand financing options
MicroStrategy takes the lead in issuing additional "permanent special shares"
MicroStrategy was the first to announce yesterday that it would issue up to US$2 billion of permanent preferred stock (perpetual preferred stock). The so-called permanent means that it has no expiration date, and preferred stock usually does not have voting rights. , dividends are usually fixed and also have priority in the event of liquidation.
MicroStrategy stated that its objective is to raise capital through a public underwritten offering of one or more perpetual special shares, which function as follows:
Convertible into Class A common stock
Pay cash dividends
Allow redemption of shares
The final terms of the perpetual preferred shares and the issuance price have not yet been determined. The purpose of the issuance is to allow MicroStrategy to continue strengthening its balance sheet and acquire more Bitcoin. The launch is expected to take place in the first quarter of 2025, but MicroStrategy also reserves the right not to perform.
Why choose "permanent special shares"?
The characteristic of perpetual special shares is that they usually have no voting rights and do not have much impact on the governance of the company. After all, according to the plan of its extraordinary shareholders' meeting, MicroStrategy's share capital will increase from the original 500 million shares to 11.5 billion shares, an increase of up to 2,200%.
However, for investors, buying special shares will relatively enjoy fixed dividend distribution, and when the company is liquidated, holders of special shares will receive asset distribution before holders of ordinary shares. For companies like MicroStrategy that do not pay dividends, the recently issued convertible bonds do not pay dividends either. Permanent special shares seem to be a good choice for investors looking for stable income.
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