MicroStrategy’s Saylor wants more ‘intelligent leverage’

(Bloomberg) — Co-founder and chairman of MicroStrategy Inc. Michael Saylor says the dotcom-era software maker has pivoted leveraged Bitcoin proxy plans to focus more on fixed income securities for raising capital to buy the cryptocurrency once its current fundraising program is exhausted.

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Saylor explained this preference in a Bloomberg Television interview when asked how he expects to finance future cryptocurrency purchases. So far, MicroStrategy has used a mix of new stock and convertible bond sales to finance the purchase, the latter of which has rewarded owners as the shares rose toward the price at which they became redeemable for stock.

“We have $7.2 billion of converts, but $4 billion of that is essentially stocks. They come through the strike price, the call price, and they trade at a delta of about 100%. They look like stocks,” says Saylor said during an interview on Bloomberg Television on Wednesday. “We’d like to go back and build more intelligent leverage for the benefit of our common stock shareholders.”

MicroStrategy has become a major investment story this year as it accelerated an unconventional plan launched in late October to raise $42 billion solely to buy and hold the cryptocurrency over the next three years. The company has already sold about two-thirds of the equity portion and about a third of the convertible bonds it planned to offer.

The Tysons Corner, Virginia-based company has announced billion-dollar purchases of Bitcoin every Monday for the past six weeks, sending its stock price soaring along with the token’s price — and raising questions in some quarters about the sustainability of the strategy.

The company uses regulated exchanges such as Coinbase to purchase Bitcoin, Saylor said. Shares of MicroStrategy are up about 500% this year, far outpacing Bitcoin’s gain of about 150%.

Hedge funds have turned to their fixed income securities for convertible arbitrage strategies: they buy the bonds and sell the stocks short, essentially betting on the volatility of the underlying stocks. This demand has helped MicroStrategy issue $6.2 billion in convertible bonds this year.

The company plans to focus more on fixed-income securities such as convertibles in the first quarter of 2025, as Saylor warns MicroStrategy is likely to deleverage too much.

“We will review our capital plan and establish a new plan depending on market conditions at the time,” Saylor said.

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