MicroStrategy’s New Capital Raising Strategy Attracts Analysts’ Attention
A “near perfect” instrument is how Bitwise’s Jeff Park described the new offering.
What to know:
- MicroStrategy is opening up a new avenue to raise capital for bitcoin with its perpetual preferred stock offering.
- Some analysts believe the new vehicle could be a major success.
- BlackRock’s PFF is the largest U.S. ETF focused on preferred stock with about $15 billion in AUM.
To say that MicroStrategy (MSTR) has been at the forefront of innovative capital raising to acquire significant amounts of bitcoin (BTC) would be an understatement. Under the leadership of Executive Chairman Michael Saylor, the company recently initiated a perpetual preferred stock offering.
Preferred stock is positioned between equity and debt on the corporate balance sheet, providing investors with the regular returns of bonds while granting them ownership stakes in the company.
Well-known MicroStrategy analyst Ben Werkman highlighted on social media the appeal of preferred stock to institutional investors, citing its lack of maturity risks, stable yield, and potential equity upside.
“I could see a scenario where [the preferred stock] starts taking some of the convertible bond space for fixed income accumulation due to the lack of any point in time maturity risk,” Werkman explained. “Preferred stock has the potential to be massively more accretive than any convertible offering has been and definitely more accretive than [share sales].”
Similarly, Jeff Park, head of alpha strategies at Bitwise Investments, referred to MSTR’s preferred stock offering as one of the most attractive securities currently available, describing it as a next-generation investment vehicle.
“STRK is a near-perfect instrument,” wrote Park. “It gives you two chances to win: First, when rates go down, it’s a huge boon to the principal, and two, if MicroStrategy goes up first, then you have a deep in-the-money option to convert and own the higher volatility asset or simply sell directly.”
The largest U.S. preferred stock ETF is the BlackRock iShares Preferred and Income Securities ETF, which manages roughly $15 billion in assets. Major corporations like Boeing (BA), Wells Fargo (WFC), and Citi Group (C) are among its largest holders.
The final pricing terms of this new security will be finalized and announced following the market close on Thursday.
