Tuesday, Canaccord Genuity maintained a Buy rating on MicroStrategy (NASDAQ:MSTR) and increased its stock price target to $1,810 from $975. The adjustment follows MicroStrategy's recent acquisition of approximately 12,000 additional bitcoins, utilizing cash on hand and proceeds from a convertible note offering. The company's total bitcoin holdings now stand at around 205,000.
MicroStrategy capitalized on the recent surge in Bitcoin prices by expanding its holdings through an $800 million convertible note offering, which was noted for its favorable terms, including a coupon of less than 1% and a conversion premium over 40%. This strategic financial move has, according to Canaccord Genuity, contributed to an 86% equity value premium over the company's bitcoin holdings.
The firm's analysis suggests that MicroStrategy's method of selling equity at a premium to fund further bitcoin purchases could be accretive to the share price. An illustrative sale of $500 million in stock to buy more bitcoin could potentially add around $23 per share in price accretion, given the current premium. This approach is seen as a unique strategy for an enterprise to accumulate bitcoin and is currently unrivaled in the market.
MicroStrategy's aggressive bitcoin acquisition model is considered noteworthy by Canaccord Genuity, especially as it has been funded by equity sales through At the Market (ATM) vehicles and now through a convertible debt offering. The analysis indicates that the company's strategy could lead to further share price increases, particularly if the value of Bitcoin continues to rise.
The company's latest move to purchase additional bitcoins has been seen as an exploitation of its full capital structure, which not only diversifies its investment approach but also potentially enhances shareholder value through increased equity premiums. MicroStrategy's pioneering strategy of integrating bitcoin into its treasury management remains without competition, as per the firm's assessment.
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