MicroStrategy Sells $2.5 Billion of Preferred Stock. More Bitcoin Buys Likely. — Barrons.com

Andrew Bary

MicroStrategy has priced nearly $2.5 billion of variable-rate preferred stock with an initial dividend yield of 10% and the proceeds likely will be earmarked for additional purchases of Bitcoin.

The company, the largest corporate holder of the cryptocurrency, boosted the size of the deal known as STRC for its coming Nasdaq ticker symbol, from about $500 million originally planned.

The offering is the fourth and largest MicroStrategy preferred deal this year and comes with a new twist. The company plans to adjust the rate with the goal of having the preferred trade close to par, or $100 per share.

MicroStrategy offered investors an inducement to buy the deal by pricing it at $90 a share. With a stated 9% dividend rate at the face value of $100, the initial yield is 10% (9% divided by 0.90). The dividend can change monthly, and dividends will be paid monthly, unlike most preferred stock that pay dividends quarterly. If the preferred stock rises to $100 each, investors could realize a price gain of more than 10%.

MicroStrategy, which does business as Strategy, is issuing 28 million of the new preferred shares, raising $2.474 billion after fees and expenses. The securities are called Variable-Rate Perpetual Stretch preferred. The face value of the preferred is $2.8 billion.

The deal is due to settle on July 29 and the company could buy more Bitcoin then. The company continues to accumulate Bitcoin using proceeds from equity and preferred sales and now owns about 608,000 coins, or about 3% of the Bitcoin outstanding — a stash now worth about $71 billion.

Write to Andrew Bary at andrew.bary@barrons.com

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