Strategy lures investors with better terms for $2 billion debt offering

Michael Saylor’s Strategy is adjusting the terms of its $2 billion convertible debt deal, slashing the conversion premium to 35% in an effort to attract investors, according to a report from Bloomberg.

The company, which until recently operated under the name MicroStrategy, targeted a 40%-50% conversion premium for the zero-coupon convertible notes maturing in 2030 at first, but the lowered stock volatility has forced a recalibration.

Hedge funds and institutional investors, who often do complex trades involving bonds and short-selling Strategy shares, have been closely watching the deal. Bloomberg data shows that Strategy’s 30-day stock volatility has dropped to less than half of its December peak, reducing the opportunity for aggressive trading strategies tied to the company’s fluctuations.

Strategy’s stock sheds value, but Bitcoin holdings surge

Strategy’s stock has taken a 30% hit since November, pulling back from its record highs. Despite the dip, the stock remains up more than 700% over the past three years, driven by the company’s unstoppable Bitcoin acquisition strategy.

As of press time, Strategy holds 478,740 Bitcoin, representing over 2.5% of the total Bitcoin supply, worth more than $45 billion at today’s prices. The company’s decision to focus on fixed-income securities and at-the-market stock sales is part of a plan to raise $42 billion by 2027 to continue accumulating Bitcoin.

The convertible debt offering is Strategy’s first since raising over $560 million through a preferred stock sale at a big discount.

Meanwhile, last Wednesday, Strategy reported its fourth consecutive quarterly loss, booking a $1.01 billion impairment charge tied to its Bitcoin holdings. This compares to just $39.2 million in impairment losses in the same period last year.

The company’s net loss for the quarter hit $670.8 million, or $3.03 per share, a striking contrast to the $89.1 million profit recorded a year earlier. The massive write-down comes as Strategy prepares to adopt a new accounting rule in Q1, which will allow it to measure Bitcoin at fair market value instead of recognizing impairment losses when prices drop.

Chief Financial Officer Andrew Kang said the fourth quarter will be the last when it recognizes an impairment charge on its bitcoin holdings.

Despite its losses, Strategy purchased 218,887 Bitcoin in the last quarter alone, spending $20.5 billion in what is the largest Bitcoin acquisition in any quarter in its history.

This brings Strategy’s total holdings to 471,107 Bitcoin as of February 2, with a market value of $46 billion. CEO Phong Le confirmed on the company’s post-earnings call that fixed-income issuance, including convertible bonds and preferred stock, will be a priority in 2025 as part of its plan to continue stacking Bitcoin.

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