Wu said author | Joey Wu
Edit this issue | Colin Wu
1. Bitcoin purchase process
On December 9, 2020, MicroStrategy purchased 29,646 bitcoins for approximately $650 million in cash, at an average price of approximately $21,925. So far, MicroStrategy holds a total of 70,470 bitcoins, with a total cost of approximately US$1.125 billion and an average purchase price of approximately US$15,964.
On February 17, 2021, MicroStrategy purchased 19,452 bitcoins for approximately $1.026 billion in cash, at an average price of approximately $52,765. So far, MicroStrategy holds a total of 90,531 bitcoins, with a total cost of approximately US$2.171 billion and an average purchase price of approximately US$23,985.
On June 8, 2021, MicroStrategy purchased 13,005 bitcoins for approximately $489 million in cash, at an average price of approximately $37,617. So far, MicroStrategy holds a total of 105,085 bitcoins, with a total cost of approximately US$2.741 billion and an average purchase price of approximately US$26,080.
On June 14, 2021, MicroStrategy entered into an open market sale agreement with its agent, Jefferies LLC, to issue common stock through Jefferies from time to time with an aggregate price of not more than $1 billion. So far, MicroStrategy holds a total of 114,042 bitcoins, with a total cost of approximately US$3.16 billion and an average purchase price of approximately US$27,713.
On December 9, 2021, MicroStrategy announced that it had purchased an additional 8,436 bitcoins in the fourth quarter at a total cost of $496 million at an average price of approximately $58,748. So far, MicroStrategy holds a total of 122,478 bitcoins, with a total cost of approximately US$3.66 billion and an average purchase price of approximately US$29,861.
On December 30, 2021, MicroStrategy announced that it had purchased an additional 1,914 Bitcoins for approximately $94.2 million in cash, at an average price of $49,229. So far, MicroStrategy has held a total of 124,391 bitcoins, with a total cost of approximately US$3.75 billion and an average price of US$30,159.
From December 31, 2021 to January 31, 2022, MicroStrategy purchased 660 bitcoins at an average price of US$37,865 for US$25 million last year. The company currently holds 125,051 bitcoins at an average price of US$30,200.
On June 29, 2022, MicroStrategy announced that it had purchased an additional 480 bitcoins for approximately $10 million at an average price of $20,817. So far MicroStrategy holds 129,699 bitcoins worth $3.98 billion, with an average price of $30,664.
MicroStrategy announced that it acquired approximately 301 bitcoins for approximately $6 million in cash between August 2 and September 19, at an average price of $19,851. So far, MicroStrateg holds a total of 130,000 bitcoins, with an average purchase price of $30,639 and a total cost of $3.98 billion.
From November 1, 2022 to December 24, 2022, MicroStrategy purchased 2,500 bitcoins and held a total of 132,500 bitcoins so far, with a total purchase price of approximately US$4.03 billion, an average of approximately US$30,397 per bitcoin.
Between February 16, 2023 and March 23, 2023, MicroStrategy purchased 6,455 Bitcoins for approximately $150 million in cash, at an average price of approximately $23,238. So far MicroStrategy holds a total of about 138,955 bitcoins, with an average purchase price of about $29,817.
On April 4, 2023, MicroStrategy purchased another 1,045 bitcoins at an average price of $28,016, for a total of $29.3 million. So far MicroStrategy holds 140,000 bitcoins, with an average purchase price of $29,803, or about $4.17 billion.
2. Debt Status
As of March 2023, Microstrategy has approximately $2.2 billion in long-term debt, as follows:
2025 Convertible Notes
On December 9, 2020, MicroStrategy announced the issuance of convertible senior notes with a total principal amount of US$650 million, including US$550 million in convertible bonds and US$100 million in options, with a conversion date of December 15, 2025. Among them, the convertible bond has a coupon rate of 0.75%, and interest is paid every six months. The conversion price was approximately $397.99 per share, representing a premium of approximately 37.5% to the closing price of common stock of $289.45 on December 8. The notes cannot be converted into stock until June 15, 2025, unless there is a "fundamental change" in the company as defined in the deed. A fundamental change is when the company is no longer listed on NASDAQ or the New York Stock Exchange, is merged, acquired, or has a change in majority ownership. If any of the above events occurs, Microstrategy may be required to repay the loan in full. That's unlikely, given that CEO Michael Saylor has more than two-thirds of the voting power.
2027 Convertible Notes
On February 17, 2021, MicroStrategy once again announced the issuance of convertible senior notes with a total principal amount of US$1.05 billion, including US$900 million in non-interest-bearing convertible bonds and US$150 million in options, both on December 15, 2027 . The conversion price is approximately $1,432.46 per share, representing a premium of approximately 50% to the closing price of common stock of $955.0 on December 8. The notes cannot be redeemed until August 15, 2026, unless there is a "fundamental change" in the company described in the indenture, ibid.
2028 Senior Secured Notes
On June 8, 2021, MicroStrategy announced the issuance of junk bonds with a total principal amount of US$500 million due in 2028, with a coupon rate of 6.125% and interest paid semi-annually, so payments must be made on June 15 and December 15 each year The interest is USD 15.3125 million.
2025 Mortgage (Partially Paid)
On March 29, 2022, MacroStrategy, a subsidiary of MicroStrategy, announced that it had reached a $205 million Bitcoin mortgage loan with Silvergate Bank to purchase Bitcoin. It will be liquidated if it breaks 4,000 US dollars.
debt repayment
According to MicroStrategy's SEC filings, since September 2022, when it reached an agreement with underwriter Cowen and Company for the sale of up to $500 million of common stock, 218,575 A shares of common stock were sold for a total proceeds of approximately $46.6 million. Net proceeds from the offering are planned for general corporate purposes, including the acquisition of Bitcoin and working capital, and, subject to market conditions, the repurchase of the 0.750% Convertible Senior Notes due 2025 and the 0% Convertible Senior Notes due 2027 Notes, and repayment of debts with Silvergate Bank.
On March 24, 2023, MacroStrategy and Silvergate signed an agreement. MicroStrategy repaid its US$205 million loan at a discount of 22%, prepaid about US$161 million, and retrieved the pledged 34,619 bitcoins.
3. Financial health
To sum up, Microstrategy currently holds 140,000 bitcoins, with an average cost of US$29,803; long-term debt is about US$2.2 billion, and the annual interest is less than US$50 million (the total interest in 2022 is US$53 million. spending will be less than last year).
Of the four debts, only about $46.6 million has been repaid on convertible notes due in 2025 and 2027 ($1.7 billion in total), at least $161 million has been repaid on mortgages due in 2025 ($205 million in total), and at least $161 million in 2028 Maturity junk bonds are still outstanding.
The 2022 annual report released by MicroStrategy shows that the profit before interest and tax (EBIT) for the whole year is -$1.276 billion, which includes the impairment loss of digital assets (net of sales proceeds), which is $1.286 billion. If this part of the floating loss is deducted, then EBIT will be US$10.54 million (of which US$3.91 million in the fourth quarter), which is a sharp drop from US$46.09 million in 2021. It can be seen that relying on the main business income alone is not enough to cover the annual interest, but the company currently holds nearly US$43.84 million in cash and cash equivalents, so there will be no debt crisis at least in 2023.
In addition, even if the company cannot pay the interest, it is possible to sell a small amount of bitcoin or equity in the company. On December 22, 2022, MacroStrategy sold about 704 bitcoins at an average price of about $16,776 for about $11.8 million in cash. This is the first sale of bitcoin since it put it on its balance sheet, potentially generating tax benefits. It can be seen that it may not be impossible to sell a small amount of Bitcoin to pay interest. Assuming that Bitcoin will remain at $15,500 in the next two years, then only 3,400 Bitcoins will be sold in 2024 to repay the interest. Therefore, there is almost no possibility of Microstrategy going bankrupt before the debt expires. As long as the price of Bitcoin reaches about 30,000 before March 2025, Microstrategy can basically achieve breakeven (it is currently in a state of breakeven).
Note: Recently, the Financial Accounting Standards Board (FASB) proposed new standards for encrypted assets, proposing to measure encrypted assets at fair value. The current bookkeeping standard complies with the U.S. Accounting Standards (GAAP), which regards encrypted assets as "intangible assets with unlimited useful life". When the price falls, it is necessary to make an impairment provision, and the loss is included in the income statement, and subsequent reversal of the impairment loss is prohibited. . In other words, a company can only report a decline in the value of its crypto assets and not an increase until the crypto assets are sold. This is based on the principle of conservatism, but cannot reflect the true value of encrypted assets.
If the FASB's proposal is passed, encrypted assets will be measured according to market prices, and the price increase can greatly increase MacroStrategy's book net profit. This article also deducts the impairment loss of encrypted assets when calculating EBIT.
