MicroStrategy, a self-proclaimed Bitcoin development company, has announced that it will issue up to $2 billion in perpetual preferred stock to further strengthen its balance sheet and acquire more BTC.

MicroStrategy Launches the "21/21 Plan"

In OCT 2024, MicroStrategy launched the "21/21 Plan", aiming to raise $42 billion in 3 years, including $21 billion in equity capital and $21 billion in fixed-income capital. To accelerate this goal, MicroStrategy has announced a special shareholder meeting and the following proposals for new share issuance:

• Increase the authorized Class A shares from 330 million to 10.33 billion to support future fundraising
• Increase the authorized preferred stock from 5 million to 1.005 billion to expand financing options

MicroStrategy First Issued "Perpetual Preferred Stock"

Yesterday, MicroStrategy announced that it will issue up to $2 billion in perpetual preferred stock. The "perpetual" means there is no maturity date, and preferred stock usually has no voting rights and fixed dividends, with priority in liquidation.

MicroStrategy stated that its goal is to raise capital through one or more public offerings of perpetual preferred stock, with the following functions:

• Convertible to Class A common stock
• Pay cash dividends
• Allow share redemption

The final terms and issue price of the perpetual preferred stock have not yet been determined. The purpose of this issuance is to allow MicroStrategy to continue strengthening its balance sheet and acquiring more BTC. The issuance is expected to take place in Q1 2025, but MicroStrategy also reserves the right not to execute it.

Why Choose "Perpetual Preferred Stock"?

The feature of perpetual preferred stock is that they usually have no voting rights and do not have a significant impact on the company's governance. After all, according to the plan for the extraordinary general meeting, MicroStrategy's share capital will increase from the original 500 million shares to 11.5 billion shares, an increase of 2,200%.

However, for investors, buying preferred stock relatively enjoys a fixed dividend distribution, and in the event of company liquidation, preferred shareholders will receive asset distribution before common shareholders. For companies like MicroStrategy that do not pay dividends, the recent issued convertible bonds also do not pay dividends, so perpetual preferred stock seems to be a good choice for investors seeking stable income.