MicroStrategy sells preferred shares at 20% discount, pushing investor yield to 10%

Odaily reports that MicroStrategy sold preferred stock units last week, a debt-like security with an 8% coupon. These shares were sold at $80 per share, 20% below the market price, effectively raising the buyer's yield to 10%, a significant concession to complete the transaction. Gabelli Funds Inc. portfolio manager James Dinsmore, who focuses on convertible securities, said, "I don't remember the last time I saw something priced this low, clearly there was some resistance to the initial pricing." Nevertheless, the investor-friendly terms of the deal allowed the company to raise $563 million, more than double its initial target, as co-founder and chairman Michael Saylor explores various capital structures to support his Bitcoin acquisition strategy. This demand indicates market interest in this asset class, the company said, and while it is more expensive than the previously issued ultra-low-interest convertible bonds and par stock, it can leverage it to raise up to $2 billion this quarter. MicroStrategy did not respond to a request for comment. "A 10% yield is not cheap capital, but given the company's profile, I think it's appropriate," said David Clott, portfolio manager at Wellesley Asset Management, "and they won't dilute existing investors' equity like the previous convertible bond issuance. This is a good outcome for them as they've opened up a new financing market." The plan is part of the company's broader plan to raise $42 billion over three years through a combination of equity and fixed-income securities, with the latter expected to be the focus this quarter. This is partly because the company has raised nearly $17 billion through its stock sale program, compared to much less through convertible bonds. The company currently holds about $47 billion in Bitcoin, accounting for more than 2% of the total.