MicroStrategy Is Pioneering Bitcoin Capital Markets, Bernstein Says

MicroStrategy (MSTR) is not just a software firm diversifying its corporate treasury into cryptocurrency, it is pioneering bitcoin (BTC) capital markets, broker Bernstein said in a research report on Tuesday.
“MSTR is the only corporate that has developed institutional demand for bitcoin linked convertibles,” analysts Gautam Chhugani and Mahika Sapra wrote.
The broker notes that to date MicroStrategy has raised $4 billion of convertible debt for the solpurpose of buying more bitcoin. A convertible bond is a type of debt security that can be converted into shares. Michael Saylor’s firm currently holds 214,400 bitcoin worth about $14.5 billion. It started buying the cryptocurrency as a reserve asset in 2020. “No other corporate has an active bitcoin investing strategy that can attract capital at scale,” the authors wrote.
MicroStrategy’s long-term convertible debt strategy means it has enough time to benefit from potential bitcoin upside with limited liquidation risk to the crypto on its balance sheet, the note said.
When bitcoin rises the Virginia-based company has more room to issue new debt, conversely when the crypto falls and leverage rises, the firm can issue new shares to cut leverage, Bernstein noted.
This use of both equity and debt has seen MicroStrategy grow its bitcoin per equity share nearly 67% in the last four years, the report said.
Bernstein notes that MicroStrategy has not sold any bitcoin since it started buying the crypto in 2020, and it expects the company to continue to raise capital to add to its stash.
The broker has an outperform rating on MicroStrategy stock with a $2,890 price target. The shares erased a drop of as much as 2.5% to trade little changed around $1,509.
Read more: Bitcoin Could Hit $1M Within 10 Years, Bernstein Says as it Initiates Coverage of MicroStrategy
UPDATE (June 18, 14:42 UTC): Updates share price reaction in last paragraph.
Edited by Kevin Reynolds.
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Will Canny is CoinDesk’s finance reporter.