MicroStrategy Pioneers Bitcoin Capital Markets

In a research report released on Tuesday, broker Bernstein stated that MicroStrategy (MSTR) is not merely a software company that is expanding its corporate treasury into cryptocurrency; it is also a pioneer in the bitcoin (BTC) capital markets

“MicroStrategy (MSTR) is the sole corporate entity that has generated institutional demand for bitcoin-linked convertibles,” stated analysts Gautam Chhugani and Mahika Sapra.

The broker has observed that MicroStrategy has raised $4 billion in convertible debt to purchase additional bitcoin. A convertible bond is a form of debt security that has the potential to be converted into shares. Currently, the firm of Michael Saylor possesses 214,400 bitcoin, which is estimated to be worth $14.5 billion.

In 2020, it initiated the acquisition of cryptocurrency as a reserve asset. The authors stated that no other corporation has an active Bitcoin investing strategy that can attract capital at scale.

The note stated that MicroStrategy’s long-term convertible debt strategy provides it with sufficient time to capitalize on prospective Bitcoin growth while minimizing the liquidation risk of the cryptocurrency on its balance sheet.

The Virginia-based company has more flexibility when issuing new debt when bitcoin increases. In contrast, according to Bernstein, the firm can issue new shares to reduce leverage when the crypto declines and leverage increases.
The report stated that MicroStrategy has increased its bitcoin per equity share by nearly 67% in the past four years due to this utilization of both equity and debt.

Bernstein observes that MicroStrategy has not sold any bitcoin since it began purchasing the cryptocurrency in 2020, and it anticipates that the company will continue to raise capital to grow its holdings.

The broker has a $2,890 price target for MicroStrategy stock and an outperform rating. The shares recovered from a 2.5% decline to trade at approximately $1,509.