MicroStrategy Shares Dropped 8% After $400M Debt Raise Announcement

The Microstrategy shares dropped by 8% after the company announced a $400 million debt raise in order to purchase more BTC. The company quickly became one of the biggest supporters in the world of Bitcoin and in today’s bitcoin news, we are reading more about it.

The business company is based in Eastern US and it shocked the world once it invested $250 million from its balance sheet into BTC. This marked the first time a US company purchased BTC directly with cash from its balance sheet for investment purposes. However, in the past, the company chief executive Micahel Saylor was critical of BTC online.

MSTR launching a speculative attack on the USD https://t.co/TKITBhGmTO

— nic carter (@nic_carter) December 7, 2020

The company purchased BTC anyway and argued that it is a better alternative than holding cash because of the vast amount of inflation and currency devaluation that is happening in the world. the company doubled down and purchased $175 million worth of BTC in September and another $500 million a week later. In total, Microstrategy owns $750 million worth of BTC which is up to 80%. However, this was not enough as the company announced yesterday that they are looking to raise $400 million in debt securities auction to purchase more BTC.

“MicroStrategy intends to invest the net proceeds from the sale of the notes in bitcoin in accordance with its Treasury Reserve Policy pending the identification of working capital needs and other general corporate purposes.”

The securities will be cash convertible or a combination of the company’s Class A common stock. MicroStrategy will have to pay a recurring interest on these securities but with the planning of buying more BTC with the capital, Microstrategy thinks that Bitcoin will outperform the interest that they will have to pay on the shares. However, as noted by an analyst, the Microstrategy shares are down by 8% in the past 24hours which marks the biggest decline in the MSTR stock since it first purchased BTC earlier this year.

Hey uhh… anyone know why microstrategy is down today? pic.twitter.com/7qxas2fCqN

— loomdart (@loomdart) December 8, 2020

The drop came when the S&P500 and other top indices were up on the day. the decision to fund BTC purchases with debt could be worrying some investors in the company that believes BTC will not increase higher as the company expects. Also, Citron Research, a stock company released a report calling MSTR the best way to buy BTC exposure is the US Stock market:

 “The Citron Fund has a position in MSTR, which we believe is the best way to own Bitcoin. While we believe BTC is going higher, we cannot provide any deeper analysis than what has been overanalyzed by all.”