MicroStrategy Plans Major Share Increase to Fund Bitcoin: Bloomberg
MicroStrategy, led by Michael Saylor, will propose a significant increase in authorized Class A shares to fund its Bitcoin buying strategy. According to reports from BloombergAnalysts expect that MicroStrategy’s proposal to increase the authorized number of shares to 10.3 billion shares will easily pass on January 21, and Michael Saylor will control about 47% of the voting rights.
It’s worth noting that MicroStrategy probably has more shares outstanding than all but four of the five companies on the Nasdaq 100. The company announced plans to raise $42 billion to buy Bitcoin over three years, nearly doubling its holdings to more than $44 billion through 10 consecutive weeks of weekly purchases.
MicroStrategy: Wall Street’s Favorite
Typically, investors will object to a share increase because it dilutes earnings per share, shareholder equity, and voting rights. Investors won’t care, though, as MicroStrategy has gained 2,500% since adopting a Bitcoin strategy in 2020, making it a Wall Street darling while Bitcoin surged nearly 800% during the same period.
While MicroStrategy has a large number of authorized shares of more than 10 billion shares, not all of them may be sold. Despite issuing more than $21 billion worth of shares, only about 43 million shares have been sold so far. Class A shareholders have limited voting rights, as most voting control is held by Class B stock, primarily owned by Michael Saylor.
MicroStrategy’s Unique Strategy
The company plans to raise up to $2 billion through an offering of preferred shares, which have priority over Class A shares. On January 21, shareholders are expected to approve an increase in authorized preferred shares from 5 million to 1 billion shares.
Notably, MicroStrategy intends to use the additional shares for stock transactions, stock issuances and settlement of convertible notes. Michael Lebowitz, a portfolio manager at RIA Advisors, said MicroStrategy’s plan to significantly increase its holdings in one go would be unique. He noted that no company has done anything on this scale.
He also warned that increasing equity issuance without increasing debt could reduce the company’s leverage, which investors consider a key element of its Bitcoin strategy.
Bitcoin approaches $105,000
Bitcoin prices reached their highest in nearly a month, near $105,000, on Friday ahead of President-elect Donald Trump’s inauguration. Bitcoin has gained nearly 12% in the past week as inflation concerns ease. Analysts note that while markets are optimistic about a crypto-friendly president, Trump will need time to act on his proposals. Bitcoin is currently trading at $104,934, up more than 5% in the past day.
