Microstrategy has set a new $2 billion target for Bitcoin expansion

MicroStrategy, the world's largest corporate owner of bitcoin, plans to raise $2 billion in a perpetual preferred stock offering.

This initiative aims to expand the company's bitcoin reserves and strengthen its balance sheet, in line with its growth strategy.

Microstrategy pushes new limits in Bitcoin funding strategy

In a January 3 announcement, Microstrategy explained that this offering differs from its previous plans to raise $21 billion in equity and fixed income instruments.

The perpetual preferred stock may be funded in a number of ways, including conversion of Class A common stock, issuance of cash dividends or redemption of shares. The offering provides regular dividends to investors without a maturity date, making it a unique vehicle for raising capital.

Dylan LeClair, director of bitcoin strategy at Metaplanet, emphasized the innovative nature of this move. He noted that this offering allows investors to gain exposure to Bitcoin's inherent volatility while providing a cost-effective way to raise micro-strategic funds.

LeClaire estimates that even with an annual dividend rate of 6 percent, the company will pay out just $120 million a year on $2 billion in revenue—for a company with more than $15 billion in equity capital by 2024.

“Volatility is the product, and the BTC yield is a key performance indicator. The indeterminate option MSTR is a very interesting product to sell to the fixed income market,” Leclair said.

Meanwhile, the company expects to start delivery in the first quarter of 2025, depending on favorable market conditions and other factors. But MicroStrategy did not commit to going ahead with the plan.

Microstrategy's consistent buying of Bitcoin has boosted the market. The company's stock price rose and secured a spot on the Nasdaq 100 index. Moreover, the company's innovative approach to financing – issuing debt and equity for Bitcoin purchases – has earned it recognition as a pioneering “Bitcoin Treasury Company”.

However, this strategy comes with challenges. Issuing new shares to raise capital dilutes the ownership of existing shareholders; It may reduce earnings per share. TThe Kobeissi Letter provides a detailed analysis of this challenge, warning that the lack of additional funding could jeopardize MicroStrategy's Bitcoin acquisition strategy.