MicroStrategy plans to sell $1 Billion in Stocks to Buy Bitcoin

Bob Coiney

June 15, 2021

With cryptocurrencies such as Bitcoins becoming the go-to investment for individuals and enterprises all over the world, it doesn’t come as a surprise that MicroStrategy, a cloud software firm, plans to invest in Bitcoin.

The company recently released a filing paired with a tweet from the CEO, Michael Saylor indicating the company plans to sell $1 Billion worth of stock and use the capital to invest in Bitcoin. MicroStrategy filed paperwork with the SEC (Securities and Exchange Commission) for the public sale of class A common stock on an Open Market Sale Agreement. According to this agreement, the company can choose to sell its stock in a gradual manner according to its requirements.

The filing further mentioned, “We intend to use the net proceeds from the sale of any class A common stock offered under this prospectus for general corporate purposes, including the acquisition of bitcoin,”

Although the company hasn’t clearly said that they will use the money to buy cryptocurrencies, it can be expected as Michael Saylor, the CEO, has shown tremendous interest in Bitcoin since last year. The company currently owns $3.7 Billion worth of Bitcoin that amounts to the majority of its treasury. Recently the company sold $500 Million in corporate debt to add the amount to the total value. 

“The concentration of our bitcoin holdings enhances the risks inherent in our bitcoin acquisition strategy,” it writes, adding: “Servicing our debt will require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our indebtedness.”

However, this decision wasn’t received without flak as every company faces risks. But MicroStrategy has been prevailing well so far and has seen quite a profit regardless of the recent fluctuations in Bitcoin. 

“Our bitcoin holdings are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents,” it wrote.

This statement, however, asks a new question, that if MicroStrategy is selling all their stocks to buy cryptos, how will they manage the cash flow?