Strategy founder Michael Saylor has revealed the firm plans to convert its $6 billion in bond debt into equity, a move that reduces debt on the balance sheet.
“Strategy can withstand a drawdown in BTC price to $8,000 and still have sufficient assets to fully cover our debt,” stated the firm on X on Sunday, prompting Saylor’s response.
The Bitcoin (BTC) treasury company currently holds $49 billion in Bitcoin reserves with a stash of 714,644 BTC.
Its convertible debt is around $6 billion, so BTC would need to fall around 88% for the two to be equal, and it still has enough to cover the debt, the firm explained.
Equitizing convertible debt means converting the bond debt into equity as stock shares rather than repaying it in cash, essentially turning bondholders into shareholders.
The move would reduce debt pressure on the company, but it can also dilute existing shareholders because new stock is issued.
The firm claims convertible debt notes are fully covered even if Bitcoin tanks 88%. Source: StrategyStrategy down 10% on average BTC purchase price
The average Bitcoin purchase price for Strategy is around $76,000, and the asset is trading at $68,400, meaning the firm is currently down around 10% on its investment.
Related: Michael Saylor signals another Bitcoin buy amid market rout
Saylor signaled another Bitcoin buy as he posted the Strategy accumulation chart on X on Sunday, a typical sign of a purchase.
The purchase would mark 12 consecutive weeks of buying as the company continues to accumulate despite a sharp decline in the underlying asset and its stock price.
Strategy stock down 70% from ATH
Strategy stock (MSTR) climbed 8.8% on Friday to end the week trading at $133.88, according to Google Finance.
The move came as Bitcoin recovered to $70,000 in late trading on Friday, but that recovery was short-lived, as it lost some of those gains in early trading on Monday morning, falling to $68,400, according to CoinGecko.
Shares in the company are down 70% from their mid-July all-time high of $456, as BTC prices have fallen 50% from their early October peak.
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Source: https://cointelegraph.com/news/strategy-plans-equitize-convertible-debt-over-next-3-6-years-saylor?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
