MicroStrategy Inc., a Virginia-based software company, is borrowing USD400 million to buy more Bitcoin. It’s the first-ever junk bond sale used for financing purchases of the volatile cryptocurrency.
MicroStrategy provides clients with a platform that has benefits, including a customized dashboard, ad hoc queries, and scorecards.
Reports reveal that the private placement is $23 million higher than MicroStrategy’s entire operating cash flow since 2016.
The company filing stated that they are taking roughly $284.5 million charges during its subsequent earnings, which exceed the company’s cumulative earnings since 2011.
MicroStrategy, widely renowned as one of the most bullish public companies on cryptocurrencies, has already issued convertible bonds worth around $1 billion as a move to acquire more bitcoins. Saylor’s focus on Bitcoin has received a lot of criticism lately.
MicroStrategy is in early pricing discussions with investors for a yield between 6.25% and 6.5% on its debut junk-bond sale. When compared, data reveals that the average junk bond yields 4.01%.
Before the impairment announcement, the firm had already taken about $265 million in charges, bringing the total amount of impairments to exceed $500 million.
It is said that accounting rules might have forced the firm to write down Bitcoin once the market value dipped below the price at which it acquired the coin.
It could mean that the purchased Bitcoin this year could be written down when the cryptocurrency touched $30,000 briefly last month unless some of the purchases took place during the handful of days when it traded below that point at the start of the year.
Elon Musk owned Tesla Inc. became one of the few mainstream companies to follow MicroStrategy’s move to buy Bitcoin.
Tesla CEO Elon Musk has also raised concerns over the coin’s environmental impact and said they are working with miners to discuss energy over transparency.
This massive acquisition of bitcoins by MicroStrategy is expected to inspire many more companies to follow suit.
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