Michael Saylor has transformed MicroStrategy from a modest software company into one of corporate America’s biggest proponents of bitcoin (BTC), amassing a vast reserve of the cryptocurrency.
On Wednesday, MicroStrategy revealed plans to raise $21 billion by issuing and selling new shares—an action that, for most public companies, would likely alarm current shareholders. This is because MicroStrategy’s market cap stood at about $50 billion at the time of the announcement, implying that the ownership percentage of current shareholders would be diluted by nearly one-third. A corresponding 33% drop in share price wouldn’t be unexpected.
Yet, MicroStrategy defies typical market responses, with its stock rising about 1% on Thursday after having more than tripled in value this year, surpassing Coinbase (COIN) in market cap. Coinbase had been the leading crypto-related stock but saw declines following weaker-than-expected third-quarter results. Interestingly, MicroStrategy’s value rose even as BTC’s price declined, due to the significant amount of bitcoin it holds.
Joe Consorti, head of growth at Theya, explained the unique appeal: “MicroStrategy’s rally reflects investor trust in its accretive dilution strategy for bitcoin—where the company uses capital markets to buy bitcoin, issuing new shares to finance these purchases and enhancing shareholder value through its bitcoin acquisitions.”
This stock sale is known as an “at-the-market” equity offering, which enables companies to issue shares directly at market prices. This type of offering is often considered a more flexible and less complex way of raising funds compared to traditional secondary offerings.
According to Bloomberg data, this is actually the largest offering of its kind—four times the previous record.
The willingness of MicroStrategy’s shareholders to accept this dilution without demanding a significant discount demonstrates their confidence in Saylor’s strategy.
“MicroStrategy shareholders are quite a unique group. Typically, dilution is seen as a drawback for shareholders,” commented James Van Straten, a senior analyst at CoinDesk. “However, as a MicroStrategy shareholder, I actually support this dilution because I know it enables the company to purchase more bitcoin, which increases the value per share and ultimately benefits shareholders.”