Market News

By Monique Mulima and Isabelle Lee

(Bloomberg) -- MicroStrategy Inc., the dot-com-era software maker turned leveraged Bitcoin proxy, bought an additional $1.5 billion of the cryptocurrency through the sale of stock. 

It was the sixth consecutive Monday that the Tysons Corner, Virginia-based firm announced acquisitions of the digital asset. The purchases follow Friday’s announcement that MicroStrategy will be included in the Nasdaq 100 Index next week. It owns about $45 billion in Bitcoin.

The decision to add MicroStrategy to the Nasdaq 100 represents a major stamp of institutional acceptance for its controversy-courting founder, Michael Saylor, whose disdain for Wall Street convention has helped spur a 500% rally in its shares this year and made him a hero to Bitcoin bulls. 

Its addition to the index on Dec. 23 is expected to fuel at least $2.1 billion stock purchases with over 200 exchange-traded products following the Nasdaq 100, according to Bloomberg Intelligence analyst James Seyffart.

MicroStrategy acquired 15,350 Bitcoin for an average price of approximately $100,386 from Dec. 9 through Dec. 15, according to an US Securities and Exchange Commission filing on Monday. Since Nov. 11, the company has bought 186,780 Bitcoin tokens.

These regular purchases are becoming expected, according to Benchmark analyst Mark Palmer, who has a “buy” rating on the stock.

“As long as MicroStrategy shares trade at a premium to the company’s net asset value, then the company’s practice of issuing stock and using the proceeds to buy Bitcoin continues to be accretive,” Palmer said. “As long as that approach remains accretive, we expect it to continue.”

The company’s stock price has risen over 500% this year as it has accelerated its Bitcoin purchases. MicroStrategy aims to raise $42 billion over the next three years through at-the-market stock sales and convertible debt offerings, which will be used to buy more Bitcoin. With its recent offerings since the November US election, the company has already surpassed its 2025 goal for at-the-market sales.

The stock jumped as much as 4.7% to $427.73 on Monday. It traded as high as $543 on Nov. 21. 

“MicroStrategy is taking advantage of the window of opportunity afforded by the increased price of Bitcoin and also the anticipation that with a more Bitcoin-friendly administration, you will see more interest in Bitcoin and in MicroStrategy, particularly among institutional investors,” Palmer said.

MicroStrategy has issued $6.2 billion worth of convertibles this year as hedge funds seek out the stock for convertible arbitrage strategies — buying the bonds and selling the shares short, essentially betting on the underlying stock’s volatility.

While MicroStrategy’s stock does face risks from the price of Bitcoin dropping, the firm’s recent convertibles do not carry as much of this risk, Palmer said.

“The company has been very careful about is not issuing any debt instruments that have covenants or other triggers that would be a potential issue if the price of Bitcoin were to drop significantly,” Palmer said. “The impact of such a drop is not as great as it would’ve been not too long ago.”

The largest virtual currency rose more than 3.5% at one point on Monday in Asia to an unprecedented $106,493, exceeding its previous peak from Dec. 5. It has jumped almost 150% this year. 

Other crypto-related companies have been following Saylor’s playbook. Bitcoin miner Riot Platforms Inc. announced Monday that it bought $67.5 million of the cryptocurrency last week with a portion of the proceeds from a convertible note offering. The company’s shares rose about 2% to $13.26.  

--With assistance from Bailey Lipschultz.

(Updates with analyst comments.)