MicroStrategy to Issue $700 Million Convertible Senior Notes

MicroStrategy has announced plans to offer $700 million in convertible senior notes, which are expected to be due in 2028. The private offering will be directed to qualified institutional buyers, adhering to Rule 144A under the Securities Act of 1933. Notably, the company may also give the initial purchasers the option to buy an additional $105 million in notes. The success of this offering, however, is contingent upon market conditions, with no guarantee of completion.

Senior Notes Details and Redemption Plans

The issued notes will bear interest and have semi-annual payments, starting March 2025. These unsecured senior obligations will mature in September 2028 unless redeemed or converted beforehand. After December 2027, MicroStrategy has the option to redeem some or all of the notes. Should fewer than all be redeemed, at least $75 million in principal must remain outstanding. 

On September 15, 2027, holders will have the right to demand the company repurchase the notes. The notes can be converted into cash, shares, or a combination, with MicroStrategy deciding the method of payment. Prior to March 2028, conversions will only be possible during certain periods. The pricing terms for the notes, such as the interest rate and initial conversion rate, will be determined when the offering is priced.

Proceeds to Redeem Senior Secured Notes

MicroStrategy plans to use the offering’s net proceeds to redeem $500 million of its 6.125% Senior Secured Notes due 2028. Redemption is expected to occur on September 26, 2024, at 103.063% of the principal, along with accrued interest. 

The redemption is contingent on completing the sale of the convertible notes. Once redeemed, the collateral backing the Senior Secured Notes, including 69,080 bitcoins, will be released. Any remaining proceeds from the offering will likely go toward acquiring additional bitcoin and for other corporate purposes.

Offering Conditions 

The notes will be sold in line with Rule 144A, therefore restricting sales to qualified institutional purchasers. Under U.S. securities rules neither the offering nor the conversion share will be registered. This offer will come via a private memorandum; no securities will be sold without the required regulatory exemption. MicroStrategy underlines that the completion of the offering or the redemption is not known.