Bernstein: MicroStrategy's longer debt maturity can provide a buffer against Bitcoin price fluctuations

ChainCatcher news, according to foxaraby, MicroStrategy is issuing stock or zero-coupon debt backed by a small reserve of Bitcoin in order to purchase a large amount of Bitcoin through simple arbitrage. The company announced in October that it plans to raise $42 billion over the next three years using these methods and is accelerating towards this goal.

Bernstein analysts believe that "MicroStrategy is playing a leveraged game with Bitcoin." The analysts noted that the longer debt maturities provide the company with some buffer against immediate repayment or Bitcoin price fluctuations. Furthermore, even if MicroStrategy has to issue stock to repay convertible bonds, the dilution effect of these stocks on the company's equity is limited. "MicroStrategy is increasingly relying on issuing stock to buy Bitcoin, but when it opts for convertible bonds, bond purchasers can gain the option to convert them into company stock at a certain price, which is almost equivalent to a call option."