MicroStrategy to redeem $1.05B in 2027 convertible notes with share settlements

MicroStrategy Incorporated has announced the redemption of its 0.0% Convertible Senior Notes due in 2027, valued at approximately $1.05 billion. The company has delivered a notice of full redemption to the trustee overseeing the outstanding notes. 

According to a January 24 press release, MicroStrategy has issued a formal notice to the trustee, stating that all the outstanding notes will be redeemed on February 24, 2025. The company will reportedly pay 100% of the notes’ principal value, along with any unpaid special interest accrued up to, but not including the redemption date. 

Investors also have the option to convert their notes into shares of its class A common stock or with cash for fractional shares before February 20, at 5:00 PM, New York time. The conversion rate is set at 7.0234 shares per $1,000 of principal, equating to a conversion price of $142.38 per share

Holders are required to strictly follow procedures in the governing indenture, which includes electronically presenting and surrendering their notes for conversion through the Depository Trust Company’s (DTC) facilities.

MicroStrategy expands convertible notes offering, likely to buy more Bitcoin 

The convertible notes redemption announcement follows Michael Saylor’s recent revelation of MicroStrategy’s unrealized Bitcoin profits. On January 22, Saylor took to X to announce the company’s 6,120 BTC gain, which he noted was a 1.36% yield on its 45,000 BTC base. 

According to the 59-year-old American entrepreneur, this represented a $642.6 million return if the holdings were priced at $105,000 per coin.

On January 21, MicroStrategy revealed it had purchased $1.1 billion worth of the cryptocurrency at an average price of $101,191 per BTC, a week before US President Donald Trump’s Inauguration last Monday.

The purchase was reportedly made in cash raised from share issuances and sales under the convertible note offerings agreement made in September last year.

Netizens are speculating the financial firm will use proceeds from the redemption of unsecured notes today to buy even more BTC. 

Profits from Bitcoin holdings could attract lawsuits

In another recent development, MicroStrategy is looking at a federal income tax lawsuit. The tax woes stem from its unrealized crypto gains, according to provisions in the Inflation Reduction Act of 2022.

The act, which introduced a “corporate alternative minimum tax,” applies a 15% tax rate based on an adjusted version of a company’s earnings. 

However, there is speculation that the US Internal Revenue Service (IRS) could exempt Bitcoin from the policy under President Donald Trump’s administration, known for its more crypto-friendly stance.

Robert Willens, a veteran tax analyst closely monitoring MicroStrategy’s dealings with the IRS, suggests the agency might favor the company and exclude unrealized crypto gains under its proposed rules. However, he cautioned that there is “no guarantee it would do so.”

“It would be easy to slot crypto assets into the same exemption that stocks are going to enjoy because there’s no real difference in the accounting,” Willens reiterated.

According to Arkham Intelligence data, MicroStrategy’s Bitcoin holdings have surpassed 430,000 BTC, with 100,000 coins currently held by Fidelity Investments. The total holdings of the investment giants are now valued at over $48 billion, at current valuations. 

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