Yeah, weird to me that Microstrategy would hold the option to convert them to equity. I think the missing piece here is what would drive forced paybacks or the “special interest” referenced. Because 0% notes at par would only make sense if the equity is worth less than the 55% premium, but MSTR holding the conversion option is very company friendly. I don’t see the return for investors in this case, so leads me to conclusion that the “special interest” triggering events and pricing must be sufficient return. Otherwise it’s “tails I win, heads you lose” for MSTR
Maybe this will make sense to you: https://www.microstrategy.com/press/microstrategy-announces-pricing-of-convertible-senior-notes-11-20-2024
Discussion
Ok, I’m not crazy. I think maybe the upside is the fact that they won’t be able to repay in dollars and conversion rate is high? They might be able to finance some conventional loan to repay some debt, but maybe note holders are betting against that.
That has to be it. But not what I would have expected. Public market degeneracy
55% over 5 years, well collateralized…that’s like what, 9%? Better than treasuries.
That’s probably the right way to think about it. But MSTR would only convert at that price if the market price was above it. Otherwise, they would just keep as debt and pay the par value. Which probably involves liquidating some bitcoin…if they can’t otherwise refinance the debt.