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2021-06-12 10:00:02 Relevant SEC Filings & Associated Information Contained Within

1. Form 8-K (June 8th, 2021) - Announcing $500M total raised from the junk bond offering. "The Company estimates that the net proceeds of the offering will be approximately $488 million, after deducting initial purchaser discounts and commissions and estimated offering expenses payable by the Company. The Company intends to use the net proceeds from the sale of the notes to acquire additional bitcoin."

2. Form 8-K (June 7th, 2021) - In this form, MicroStrategy reveals an additional $284.5M in impairment losses, "related to its bitcoin for the three months ending June 30, 2021".

3. Form 8-K (May 18th, 2021) - This is the form 8-K where we get an updated total for the total Bitcoin that MicroStrategy has/had on hand on that date (along with the overall avg. price per BTC paid). "As of May 18, 2021, the Company holds approximately 92,079 bitcoins that were acquired at an aggregate purchase price of $2.251 billion and an average purchase price of approximately $24,450 per bitcoin, inclusive of fees and expenses."

We're going to do some quick math on those Bitcoin holdings (note that this doesn't include whatever additional purchases that they're planning on making because they have yet to release that yet; they just finished that $500M fundraise sale). Open / Comment

2021-06-12 09:54:19 3. MS announced another $284.5M in "impairment losses" due to the crash (among other factors). 4. This is debt that's going to have to be outright paid back (not converted for stock at some point in time; so things are getting a bit more serious /// MS is… Open / Comment

2021-06-12 09:45:44 3. MS announced another $284.5M in "impairment losses" due to the crash (among other factors).

4. This is debt that's going to have to be outright paid back (not converted for stock at some point in time; so things are getting a bit more serious /// MS is going to have to hope that the ROI on their investment is fairly significant at this point.

We're going to go over to Moody's and review their most recent downgraded rating of these senior secured bonds (i.e., "junk bonds"; 'sub-prime'), that were issued by MS recently and see what that means in objective terms for the company. Open / Comment

2021-06-12 09:43:38 Open / Comment

2021-06-12 09:43:35 Most Recent Finance Round for MS is a Little More Dark

Rather than issuing convertible notes, MS is now borrowing via "junk bonds" (we'll get into that in a second).

Terms of the Borrow

1. $500M in total that they borrowed through these junk bonds

2. Bonds have a 7-year yield, pay 6.125% interest (annual); that amounts to about $758M (the total interest is usually not paid until maturity with these bonds) Open / Comment

2021-06-12 09:25:21 From their 8-K filing; if you want to look at all of MS's SEC filings (which provide detailed information about their various securities purchases, executive structure re-shuffling, etc., then visit - https://sec.report/Ticker/MSTR) Open / Comment

2021-06-12 09:24:32 Most Questionable Decision by MicroStrategy

Their decision to purchase 19,452 at $52,765 / BTC (announced here: https://www.microstrategy.com/en/investor-relations/press/microstrategy-acquires-additional-19452-bitcoins-for-1-026-billion_02-24-2021)

This was a $1.02B purchase total (this is what that $1B in "debt financing went to).

Here's where the second layer of losses comes in for MicroStrategy because, as we all know, Bitcoin slid off a cliff later on this year (in May).

Right now its trading around $35k (generous bump since its decreased recently).

That means that those holdings are now worth $680M, representing a pure loss of approx. $340M.

This doesn't consider the fact that MS made some other questionable purchases (such as $15M in BTC at $59k [ouch]).

https://sec.report/Document/0001193125-21-105625/ Open / Comment

2021-06-12 09:18:07 Price Floor for Investors Limiting Losses

You may have missed this clause that was in the press release, but there is a price floor (as typical with convertible notes of this nature).

Specifically, it states, "Holders of notes may require MicroStrategy to repurchase their notes upon the occurrence of certain events that constitute a fundamental change under the indenture governing the notes at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus any accrued and unpaid special interest to, but excluding, the date of repurchase."

Typically, convertible notes must be purchased at par price by the issuer if the notes are not converted by the maturity date (Feb. 2027 in this case).

This is an option that allows investors in the convertible notes to salvage losses in the instance the notes fall below the par price (in this case, that's $955).

Doing Some Quick Math

MS said that they issued $1.05B in convertible notes.

1.) 1.05B/1000 = 1,050,000 (diff tranches of $1,000)

2.) 1050000*.6981 (stock per $1k of convert. notes) = 733k stock (approx. issued)

Currently the price per share for MS = $510 ; that's about $445 below par price.

If these convertible notes were to mature right now, then MS would be on the hook for -$326M / $700M (overall out of pocket).

But that's not considering the additional $600M in debt financing that MS also did this year.

Before we get to that though, we're going to look at the crazy losses that MS took off of their 19k BTC purchase at $52k. Open / Comment

2021-06-12 09:08:40 Unpacking What We Just Read Above The terms that MS was able to get for this convertible debt were actually very favorable for the business. To wit, they were able to raise the entire $1.05B without an interest requirement. On top of that they got investors… Open / Comment

2021-06-12 09:00:36 Terms of the First Convertible Note Offering by MicroStrategy The official press release from MS can be found here: https://www.microstrategy.com/en/investor-relations/press/microstrategy-completes-1-05b-offering-of-convertible-senior-notes_02-19-2021 We're… Open / Comment