MicroStrategy Inc, a US-based enterprise software business, appears to be more enthusiastic about bitcoin than ever before, announcing on Monday that it will issue $400 million in bonds to institutional investors and use the profits to buy more Bitcoin. The company intends to raise $400 million by selling corporate bonds. For the first time ever, a junk bond will be used to purchase cryptocurrency. In addition, the business intelligence organization will write down the value of its current assets.
The existing coins will be retained by the newly formed subsidiary, according to MicroStrategy, which is led by Michael Saylor. MacroStrategy LLC is the name of the other new subsidiary, which will keep the 92,079 bitcoin it has purchased thus far.
The new notes will be completely guaranteed by MicroStrategy Services Corporation, a wholly-owned subsidiary of Saylor’s company. The bonds will be backed by the firm’s existing assets, including any BTC acquired through the proceeds of the notes, on a senior security basis. After seven years, the notes will mature, and they will not be redeemed for the next three years.
For the three months ending June 30, 2021, the company expects to suffer an impairment loss of at least $284.5 million due to variations in the market price of bitcoin. The loss is a result of the current market crisis, which was brought about by regulatory monitoring. Notably, the total loss is completely attributable to Bitcoin holdings.
The impairment that MicroStrategy is compelled to record on its bitcoin holdings is based on the lowest price of bitcoin within the quarter, according to Mark Palmer, a BTIG fintech analyst who follows MSTR. If bitcoin recovers during that quarter, the corporation will be unable to write it off.