Price Floor for Investors Limiting Losses You may have misse | LibreCharts

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.