MicroStrategy Announces New Preferred Stock Offering

TYSONS CORNER, VA – MicroStrategy Incorporated (MSTR), known as Strategy, with a current market capitalization of $89.35 billion and trading at $341.78, has introduced a new class of capital stock, the "10.00% Series A Perpetual Strife Preferred Stock," with the issuance of 8.5 million shares on Tuesday. According to InvestingPro data, the company has delivered an impressive 121% return over the past six months. This move, detailed in a recent SEC filing, is part of a public offering under the Securities Act of 1933.

The Perpetual Strife Preferred Stock will carry an annual dividend rate of 10.00% on the stated $100 per share, payable quarterly starting June 30, 2025. If dividends are not paid on schedule, additional compounded dividends will accrue, potentially reaching up to 18% per annum. This move comes as InvestingPro analysis shows the company currently operates with a moderate debt-to-capital ratio of 0.08, though its current ratio of 0.71 indicates short-term liquidity challenges. The new stock ranks senior to Strategy’s common stock and existing preferred stock regarding dividend payments and asset distribution in the event of company liquidation.

Strategy’s board retains the right to redeem all shares of Perpetual Strife Preferred Stock under certain conditions, such as if outstanding shares fall below 25% of the initial issue or in the case of a "Tax Event." Additionally, if a "Fundamental Change" occurs, holders can require Strategy to repurchase their shares at a predetermined price.

The Perpetual Strife Preferred Stock has voting rights on specific corporate matters but does not grant voting rights alongside Class A Common Stock holders on general corporate matters. Strategy is restricted from issuing any stock that ranks senior to the new preferred stock without majority consent from the Perpetual Strife Preferred Stock holders.

The SEC filing also notes that if Strategy fails to pay dividends consecutively, the holders of the Perpetual Strife Preferred Stock, along with certain other stockholders, will have the right to elect a director to Strategy’s board.

This strategic move by MicroStrategy is based on a press release statement and aims to raise funds while offering investors a potentially lucrative dividend rate. The company’s actions reflect its ongoing efforts to adapt its capital structure in a dynamic financial landscape, particularly noteworthy given its current unprofitable status with a net loss of $1.17 billion in the last twelve months. For deeper insights into MicroStrategy’s financial health and future prospects, investors can access comprehensive analysis through InvestingPro, which offers exclusive access to 12 additional ProTips and detailed financial metrics.

In other recent news, Strategy has been active in the capital markets with several significant financial maneuvers. The company reported substantial net proceeds from recent stock sales, including 1,975,000 shares of Class A common stock and 13,100 shares of 8.00% Series A perpetual preferred stock, raising approximately $592.6 million and $1.1 million, respectively. These funds were primarily used to acquire approximately 6,911 bitcoins, bringing Strategy’s total holdings to around 506,137 bitcoins. This acquisition strategy aligns with the company’s commitment to integrating Bitcoin into its business model.

Additionally, Strategy announced the pricing of an offering of 8.5 million shares of Series A Perpetual Strife Preferred Stock at $85.00 per share, expected to yield net proceeds of about $711.2 million. The proceeds will be directed towards general corporate purposes, including further Bitcoin acquisitions. Analyst firm Bernstein SocGen Group has reiterated an Outperform rating for Strategy, with a price target of $600, reflecting confidence in the company’s strategy and growth potential.

Meanwhile, Monness Crespi Hardt initiated coverage on Strategy with a Neutral rating and a $200 price target, citing the potential for market saturation and increased costs associated with preferred stock issuances. Strategy’s ongoing financial activities underscore its position as a significant player in the cryptocurrency market, with a clear focus on expanding its Bitcoin portfolio.

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