MicroStrategy Raises $563.4M via New Preferred Stock Issue, but Market Reaction Is Mixed

Depending on which news outlet you read this morning, investment demand for MicroStrategy's new STRK was either far less than or double the company's goal.

MicroStrategy’s recent capital raise fell short of the company’s goal, according to calculations by market participants.

The Nasdaq-listed business aimed to raise $250 million with its new Series A Perpetual Strike Preferred Stock, but ended up securing $563.4 million, as per a press release.

However, the company’s press release stated that it intended to settle a public offering of 8% dividend-yielding stock with a liquidation preference of $100 per share, but ended up offering those shares at $80 apiece. This suggests that there was not enough demand from investors to sell that quantity at $85, $90, or $95 per share.

As a reminder, liquidation preference is the right to receive money back first — a “preference” before other equity owners — in the event of a “liquidity” (payout) event such as acquisition, public offering, or dividend.

The lower the price at which the shares are sold, the greater the liquidation preference that investors will enjoy. In this case, the 20% discount on the liquidation preference meant that investors were able to secure a significant advantage over common shareholders.

This is especially relevant considering that MicroStrategy’s leverage strategy relies on these types of financial instruments to secure capital for its bitcoin purchases.

The company’s latest capital raise comes after a year of pivoting towards BTC, which began in August 2020. Since then, the firm has acquired 132,500 BTC at an average price of around $30,397.