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MicroStrategy is pioneer in Bitcoin capital markets, says Bernstein
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MicroStrategy is leading the way in bitcoin capital markets, report says.
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The company raised $4 billion in convertible debt to buy bitcoin.
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No other company has an active bitcoin investment strategy that can attract large amounts of capital, Bernstein said.
MicroStrategy (MSTR) is not only a software company diversifying its corporate treasury into cryptocurrency, but is also pioneering the bitcoin {{BTC}} capital markets, broker Bernstein said in a research report on Tuesday.
“MSTR is the only company that has developed institutional demand for bitcoin-linked convertibles,” wrote analysts Gautam Chhugani and Mahika Sapra.
The broker notes that to date MicroStrategy has raised $4 billion in convertible debt with the aim of buying more bitcoin. A convertible bond is a type of debt security that can be converted into shares. Michael Saylor’s company currently holds 214,400 bitcoins worth approximately $14.5 billion. He began purchasing the cryptocurrency as a reserve asset in 2020. “No other firm has an active bitcoin investment strategy capable of attracting capital at scale,” the authors wrote.
MicroStrategy’s long-term convertible debt strategy means it has enough time to benefit from bitcoin’s potential upside with limited liquidation risk for the cryptocurrency on its balance sheet, the note said.
When bitcoin rises, the Virginia-based company has more room to issue new debt, conversely, when the cryptocurrency falls and leverage increases, the company can issue new shares to reduce leverage, Bernstein noted.
This use of both equity and debt has seen MicroStrategy grow its bitcoin per equity share by nearly 67% over the past four years, the report said.
Bernstein notes that MicroStrategy has not sold bitcoin since it began buying the cryptocurrency in 2020, and he expects the company to continue raising capital to add to its stockpile.
The brokerage has an outperform rating on MicroStrategy shares with a price target of $2,890. The shares recovered a decline of up to 2.5% to settle just around $1,509.
To know more: Bitcoin could reach $1 million within 10 years, Bernstein says as he initiates coverage of MicroStrategy
UPDATE (June 18, 2.42pm UTC): Update stock price reaction in last paragraph.