MicroStrategy’s stock sinks after plan to offer convertible debt to buy bitcoin

MicroStrategy said late Monday that the $600 million in senior notes due 2030 it plans to offer can be converted into shares of common stock, cash or a combination of both.

The notes will be part of a private offering, in which only people believed to be “qualified institutional buyers” can participate.

“MicroStrategy intends to use the net proceeds from the sale of the notes to acquire additional bitcoin and for general corporate purposes,” the company stated.

The stock sank 10.5% in morning trading, after closing Monday at the highest price since March 17, 2000. That puts the stock in danger of suffering its biggest one-day selloff since it tumbled 19.6% on Nov. 9, 2022.

The pullback comes after the stock rocketed 94.1% amid a six-day win streak, which was the longest win streak in four months and the biggest six-day gain in three years.

Read: MicroStrategy stock rises 24% — tops $1,300 for first time in 24 years as bitcoin soars.

MicroStrategy’s market capitalization ballooned by about $11 billion over the past six days, to $22.6 billion at Monday’s close.

The company said in its annual report filed in February that as of Dec. 31, it had $2.21 billion in debt.

S&P Global Ratings rates MicroStrategy’s credit at CCC+, which is seven-notches deep into speculative grade, or “junk,” territory.

The company said the interest rate, conversion price and other items related to the latest debt offering will be determined when it prices, which is still unknown.

MicroStrategy’s stock has hiked up 89%, while bitcoin has climbed 59.5%, the SPDR S&P Software & Services ETF
XSW
has slipped 0.9% and the S&P 500 index
SPX
has gained 6.6%.