Analytics software provider MicroStrategy (MSTR) faced its first obstacle in terms of raising capital for its Bitcoin purchases. Indeed, the company sold preferred stock units at a discounted price of $80 apiece, which is 20% lower than the marketed price. As a result, this discount increased the yield to 10% for buyers.
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Despite the discounted price, MicroStrategy raised $563 million, more than double its initial target. Unsurprisingly, the company plans to use this funding to support its Bitcoin-buying strategy. In addition, MicroStrategy’s ability to raise capital through this method shows that the market is interested in this asset class. In fact, the firm may raise up to $2 billion this quarter using this method.
It is worth noting that the preferred stock units offer a quarterly dividend and have a cumulative feature, which means that missed payouts will eventually be made. Furthermore, the conversion price is set at $1,000, which is roughly 200% above the latest closing price. This lofty threshold lowers the odds of conversion to common stock in the near term and delays the share dilution that would otherwise affect existing shareholders.
Is MSTR a Good Stock to Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on MSTR stock based on nine Buys assigned in the past three months, as indicated by the graphic below. In addition, after a 604% surge in its share price over the past year, the average MSTR price target of $557.50 per share implies 61.3% upside potential.
