Cryptocurrency News

MicroStrategy invests $1.6 billion in junk bond offering to buy bitcoin

Software firm Microstrategy has raised $1.6 billion in a junk bond offering — four times the amount initially sought.

Earlier this week, the company announced With a view to using the proceeds to buy bitcoin, it will issue $400 million worth of junk bonds in a private offering (B T c)

Junk bonds are loans offered by companies without investment-grade credit ratings, and typically offer high returns to investors while taking on higher risks. Returns between 6.125% and 6.25% have been issued for the bond, assuming the return given by Treasury bonds.

“The Notes will be fully and unconditionally guaranteed, on a senior secured basis, jointly and severally, by MicroStrategy Services Corporation, a wholly owned subsidiary of MicroStrategy, and certain subsidiaries of MicroStrategy, which will be subject to the termination of the Offering. be created or achieved,” MicroStrategy’s announcement said.

a day later, firm announced It would increase its bond offering to $500 million after it was filled with an order of $1.6 billion.

micro strategy at present holds the most bitcoins Of all the publicly traded companies on its balance sheet, that amounted to a dollar valuation of about $3.2 billion — more than twice the value of Tesla ($1.4 billion) of bitcoin.

The share price of MicroStrategy increased in line with the rising price of bitcoin during 2020 and 2021. But keeping bitcoin on its balance sheet wasn’t enough to stop MicroStrategy’s stock slide, which eventually came as the cryptocurrency market collapsed. Microstrategy’s share price is down 45% since bitcoin peaked in early April.

MicroStrategy also revealed the formation of a new subsidiary, called MacroStrategy LLC, to hold its existing 92,079 Bitcoins.

The reaction to the news on social media was generally varied. Bitcoin supporters celebrated the news, noting the huge increase in demand for the microstrategy’s bonds.

Crypto skeptic Peter Schiff questioned the wisdom of buying the historically volatile asset. Schiff asked how the sudden drop in the price of bitcoin would affect microstrategy’s business operations.

let’s wait and see.

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