Analysts Alexandre Schmidt and Satish Patel at research firm Coinshares evaluated MicroStrategy’s 21/21 Plan, a recently announced strategy to raise $42 billion in capital over the next three years to acquire more bitcoin (BTC) as a trading asset. reserve and increase the performance of your treasury.
This plan, although ambitious, “depends largely on a series of factors,” according to the report of the researchers.
First, MicroStrategy is based on favorable financing conditionssay analysts. “The company needs demand for its convertible bonds to remain strong, since these financial instruments allow it to acquire bitcoin without diluting its shareholders and at a lower cost of capital,” they noted.
They recalled that, in 2021, MicroStrategy was able to increase debt capital through convertible coupons, but coupon rates “have been rising with new issuances, which could complicate future financing,” they said.
As a second point, analysts point out that MicroStrategy Is Strongly Tied to Its Holdings of bitcoin. “There is a significant risk that if MicroStrategy decides to dump some of its bitcoin, its market valuation premium will crumble, dismantling an essential pillar of its investment case,” Schmidt and Patel warn.
BTC sales too can trigger significant tax events, considering the capital appreciation of $7.7 billion since the company started buying bitcoin. “In the future, the company could face taxes on unrealized gains related to its bitcoin holdings,” they indicated.
Additionally, Coinshares analysts determine that MicroStrategy’s bitcoin business it might have already outgrown its original software business. This implies that cash flows from legacy operations may not be sufficient to service the coupons on its debt.
However, they note, “the company may be able to address this by finding alternative uses for its gigantic bitcoin balance, and ‘putting it to work’, in the form of a loan or using derivatives on its holdings to generate income and provide a future source of income. support for debt payment.”
The 21/21 Plan, announced last week, seeks to raise a hefty figure of USD 42 billion. Michael Saylor, executive president of MicroStrategy, explained that the plan includes an offering of shares at market price for 21,000 million dollars and an objective of raising another 21,000 million in fixed income securities, as reported by CriptoNoticias.
Currently, MicroStrategy is the publicly traded company with the largest amount of bitcoin accumulated, with more than 250,000 coins, and maintains a consistent BTC buying strategywhich has been a source of inspiration for other companies and entrepreneurs.
MicroStrategy’s bitcoin investment strategy has inspired several companies such as Semler Scientific and Metaplanet, and even smaller entrepreneurs, such as restaurant owners in the United States, who avoided COVID-19 bankruptcy by applying Michael Saylor’s bitcoin strategy and MicroStrategy, as reported by CriptoNoticias.
This article was created using artificial intelligence and edited by a human Editor.
