MicroStrategy Is Pioneering Bitcoin Capital Markets, Bernstein Says

In their analysis, Gautam Chhugani and Mahika Sapra note that MSTR is currently the lone corporation to have successfully generated significant institutional interest in Bitcoin-linked convertible securities.

The broker points out that MicroStrategy has obtained a total of $4 billion through the sale of convertible bonds so far, which they have used to purchase more bitcoin. A convertible bond signifies a type of debt instrument that can be transformed into equity shares. Currently, Michael Saylor’s company owns approximately 214,400 bitcoins, valued at around $14.5 billion. They initiated their bitcoin acquisitions as a strategic reserve asset in the year 2020. According to the authors, “no other corporation boasts an active bitcoin investment approach capable of drawing substantial financial resources.”

As a financial analyst, I would explain it this way: MicroStrategy’s approach to long-term convertible debt for Bitcoin investment offers several benefits. This strategy grants us ample time to reap potential gains from the cryptocurrency market. Simultaneously, it minimizes our immediate risk of having to liquidate Bitcoin holdings on our balance sheet in unfavorable market conditions.

As a researcher studying the impact of Bitcoin on financial markets, I’ve observed an intriguing dynamic between this cryptocurrency and one Virginia-based company’s debt and equity issuance strategy. When Bitcoin experiences price increases, the company gains more flexibility to issue new debt due to reduced leverage. Conversely, when Bitcoin declines and leverage becomes a concern, the firm can opt to issue new shares to help mitigate the increased leverage. In essence, Bitcoin’s volatility influences the company’s capital structure decisions.

As a researcher examining MicroStrategy’s financial growth in relation to bitcoin, I discovered that the company’s strategy of employing both equity and debt has significantly boosted the value of its bitcoin holdings per share by approximately 67% over the past four years.

MicroStrategy, as mentioned by Bernstein, hasn’t offloaded any bitcoin from its holdings since their acquisition began in 2020. The company is projected to keep on procuring funds for expanding its bitcoin reserves further.

The broker recommends outperforming the market with a predicted price of $2,890 for MicroStrategy’s stocks. However, at the time of publishing, the shares were experiencing a 2.5% decrease and were priced around $1,470.