MicroStrategy revealed plans to raise $42 billion in new capital for bitcoin purchases over the next three years, according to its Publication of third quarter 2024 results on October 30, 2024. The company holds 252,220 bitcoins as of September 30, 2024, making it the largest publicly traded bitcoin holding company in the world according to Coingecko data.

The new capital raising initiative, called the 21/21 Plan, aims to raise $21 billion through equity offerings and an additional $21 billion through fixed income between 2025 and 2027.

“Our goal remains to increase the value generated for our shareholders by leveraging the digital transformation of capital. Today we are announcing a strategic goal to raise $42 billion in capital over the next 3 years, comprising $21 billion in equity and $21 billion in fixed assets. income securities, which we call our “21/21 Plan,” said Phong Le, president and CEO of MicroStrategy in a statement. press release statement.

Three-year, $42 billion Bitcoin investment plan

MicroStrategy’s “21/21 Plan” targets $42 billion in new capital for 2025-2027. The plan is split equally between two sources: $21 billion from new equity offerings and $21 billion via fixed income, according to MicroStrategy’s Q3 2024 earnings release.

“We’re essentially creating leverage by tapping into the convertible bond market,” Michael Saylor, executive chairman of MicroStrategy, said at an event at Bernstein this month, according to Bloomberg. “Over time, we will explore the fixed income market; we will consider issuing preferred stock – things that are, in essence, a swap.

The capital raising schedule shows a steady increase:

• 2025: $10 billion planned ($5 billion in stocks, $5 billion in bonds)
• 2026: $14 billion planned ($7 billion in stocks, $7 billion in bonds)
• 2027: $18 billion planned ($9 billion in stocks, $9 billion in bonds)

To measure the effectiveness of bitcoin purchases versus issuing new shares, MicroStrategy uses a BTC Yield metric. For every 100 new shares issued, the company aims to buy enough bitcoins to maintain 106 to 110 bitcoins per share from 2025 to 2027. In 2024, it exceeded this goal, reaching almost 118 bitcoins per share.

MicroStrategy raised $2.1 billion in Q3 for Bitcoin

The company’s bitcoin holdings reached a market value of $16.007 billion at the end of the third quarter of 2024, with the bitcoin price at $63,463. MicroStrategy acquired these securities for a total cost of $9.904 billion, or an average of $39,266 per bitcoin, according to its third-quarter earnings release.

MicroStrategy raised $2.1 billion in Q3 2024 to expand its bitcoin holdings in two ways:

• $1.1 billion by selling 8 million shares of Class A common stock (common stock of corporations)
• $1.0 billion via convertible senior notes – bonds that can be converted into company stock at $183.19 per share by 2028

The company used the new bond money to pay down its older, costlier debt — $500 million in senior secured notes with an interest rate of 6.125%. The company’s cash reserves remained around $46 million, the same as at the end of 2023.

MicroStrategy reduces borrowing costs

MicroStrategy owes $4.3 billion in total debt with a low average interest rate of 0.811%. The company reduced its annual interest payments by $24 million after replacing expensive loans with cheaper ones in the third quarter of 2024, according to its earnings release.

One key change: MicroStrategy repaid its $500 million loan that required bitcoin as collateral. Now, the 252,220 bitcoins held by the company are free of any loan obligations.

Bitcoin Strategy Shows Strong Growth

MicroStrategy increased its bitcoin holdings by 11% in the third quarter of 2024, bringing the total to 252,220 bitcoins. The company’s BTC yield – the rate at which bitcoin holdings grow relative to the number of shares – reached 17.8% in 2024. For investors who bought MicroStrategy shares when the company began buying bitcoin as of August 2020, the yield stands at 1,989%, according to third quarter 2024 revenue data.

Looking ahead, MicroStrategy has defined three main goals:

• Raise $42 billion by 2027 through balanced stock and bond sales
• Buy Bitcoin at a rate that exceeds the creation of new shares by 6-10% per year
• Keep all your bitcoin holdings free from any loan obligations