A plain English explanation of MSTRs convertible bond strategy (sort of long, sorry)
Posted: Nov 23, 2024
- Company MSTR is issuing convertible bonds at 0% interest with a convert price above current share price
- MSTR uses bond proceeds to buy bitcoin, increasing share value
- Bond holders can convert bonds into shares if stock price rises above convert price
- Dilutive to existing shareholders, but only if stock appreciates
- Bitcoin is not encumbered in bonds, but must be paid off if bonds mature
- MSTR aims to entice other companies to follow suit, potentially leading to systemic risk
- FASB accounting rule changes in 2025 will allow for fair valuation of bitcoin on corporate balance sheets
- MSTR's future earnings may see significant gains if accounting rules change is implemented
- Long-term risk due to potential for other companies to adopt similar strategies
- Uncertain future for MSTR CEO Michael Saylor, could lead to huge success or financial ruin
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