By Medha Singh
(Reuters) -Shares of MicroStrategy dropped about 9% on Tuesday after the software firm announced plans to raise funds through a $600 million private offering of convertible notes to buy more bitcoins.
The listed company with the biggest bitcoin holding hit a 24-year peak on Monday, as the cryptocurrency climbed closer to 2021 record high.
U.S. companies have raised nearly $7 billion in the last two weeks through convertible bonds at lower coupon rates in a high interest rate environment.
MicroStrategy, which began buying bitcoins in 2020 and hoarding, will buy more with the funds, as revenue from its software business has been declining.
Last month, MicroStrategy bought about 3,000 bitcoins, taking its total holdings to 193,000 bitcoins — bought at an average price of $31,544 apiece as of Feb. 25.
At the current bitcoin price of $66,850, its holdings are worth $12.90 billion, according to Reuters calculations, nearly double their purchase price.
The company’s valuation stood at $22.64 billion up to the last closing price, LSEG data showed.
“Maybe MicroStrategy has found the perpetual money trade, repeatedly sell debt, and invest the proceeds in the asset you own, further fueling its rally,” said Michael O’Rourke, chief market strategist at JonesTrading.
The four brokerages covering the company rate it “buy” or higher.
A 94% year-to-date gain in the share price of MicroStrategy, which was last up at $1,220, has, however, hurt short sellers.
With about 20.6% of MicroStrategy’s free float under short position, short sellers have lost about $2.5 billion so far this year, with $1.6 billion in the last five trading days, data and analytics company Ortex said.
Publicly listed companies together hold around $18.5 billion of bitcoin, data from the Bitcoin Treasuries website shows.
(Reporting by Medha Singh in Bengaluru; Editing by Shinjini Ganguli)
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