Benchmark Highlights MicroStrategy’s $2B Plan for Perpetual Preferred Stock Offering

MicroStrategy, under the leadership of Executive Chairman Michael Saylor, has set its sights on raising $2 billion through a new financial strategy involving perpetual preferred stock. This capital raise was announced on January 3 and marks the latest effort in the company’s ongoing strategy to acquire more bitcoin (BTC). During a recent investor meeting at the ICR conference in Orlando, Saylor explained how this move will help the company further secure its position in the crypto space.

Unlike its previous financing methods, such as at-the-market (ATM) offerings, cash reserves, and convertible bonds, MicroStrategy is now looking to issue perpetual preferred stock, which provides the company with long-term funding without a fixed maturity. This new instrument, which has no expiration date, allows the company to continue accessing capital while offering fixed dividend payments to investors, without the risk of having to redeem shares within a short timeframe.

Saylor highlighted the advantages of this approach, particularly the extended duration of the perpetual preferred stock compared to convertible bonds, which typically have a tenor of four to eight years. By using perpetual preferred stock, MicroStrategy benefits from a more stable and less volatile capital structure, allowing it to continue focusing on its bitcoin acquisition strategy with less pressure from short-term debt obligations.

With a potential mid-single-digit yield and a relatively low-risk profile, the perpetual preferred stock is expected to attract institutional investors, such as pension funds and banks, who seek secure and predictable returns. The move is also expected to complement the company’s ongoing bitcoin purchases, which recently saw the company acquire 2,530 BTC, bringing its total holdings to 450,000 BTC.

The terms of the offering, which include dividend payments and possible conversion to common stock, are expected to be finalized in the first quarter of 2025. MicroStrategy’s board is also set to hold a Special Meeting for Shareholders on January 21, 2025, where they will vote on increasing the authorized class A common stock and preferred stock.

Benchmark has maintained a buy rating on MicroStrategy with a price target of $650 per share, indicating a strong belief in the company’s ability to execute on its strategy and continue benefiting from its bitcoin holdings. The company is also scheduled to hold its Q4 earnings call on February 4, 2025.