MicroStrategy uses convertible notes to raise billions for Bitcoin purchases without tapping operations. The company now holds 402,100 BTC bought for $23.4 billion at an average of $58,263 per coin, but faces risks if Bitcoin crashes 80% or liquidity dries up.
Questions this video answers
15,400 Bitcoin for $1.5 billion.
402,100 Bitcoin acquired for $23.4 billion.
$58,263 per Bitcoin.
Up to 80% corrections.
Chapters
MicroStrategy just bought another 15,400 Bitcoin for $1.5 billion. This brings their portfolio to 402,100 Bitcoin acquired for $23.4 billion at an average price of $58,263 per Bitcoin. Hold up. How exactly do MicroStrategy and Michael Saylor get all the money to purchase such large amounts of Bitcoin? This is where things get really interesting. Ever heard of convertible notes? If you have, let us know by smashing that like button. And if you haven't, get ready to learn something new. Convertible not type of loan that a company takes from investors. Just like a regular loan, the company agrees to pay back the money with interest. However, what's unique about convertible notes is that instead of just being paid back in cash, these notes can be converted into company stock or shares if certain conditions are met. This is a quick rundown of how MicroStrategy, under the guidance of Michael Saylor, uses convertible notes to raise money specifically to buy Bitcoin. As you can see in the chart, investors have the option to convert their initial loan, the convertible notes, into shares of MicroStrategy stock. This can be immensely beneficial if the stock price of the company goes up, as investors can benefit from the price increase and make more money. However, if the stock price goes down, investors still receive their interest payments and over a certain period of time, get their initial loan back. So it's a win win situation for both parties. MicroStrategy gets the funds it needs to purchase more Bitcoin without dipping into its own operational cost, with the hope that Bitcoin's value will increase over time, boosting the company's overall worth and its stock price. And investors get a very desirable return on their investment with a chance to own shares in a massive company, increasing their chances of substantial profits from stock appreciation. So, pretty great, right? But there's a catch. Oh man, there's always a catch. This strategy ties both parties, the convertible notes holder and microstrategy, to the volatile nature of Bitcoin. If the price of Bitcoin continues to go up, the company can keep calm and carry on. But if the price of Bitcoin crashes by a significant amount, MicroStrategy could face serious liquidity issues. Since most of its balance sheet is tied up to Bitcoin. This could result in the need to sell the asset at unfavorable prices or at a large discount to meet its financial obligations. What do you think? Is Michael Saylor the visionary, that the Bitcoin community needs? Or is he just placing too much trust in an asset that is known for up to 80% corrections leading to huge financial losses? Let us know in the comments. Is there something you would do differently than Michael Saylor? As always, remember to like and subscribe to the official Cointelegraph YouTube channel. It.
