MicroStrategy Announces Three-Year $42B Bitcoin Purchase Plan

TLDR

MicroStrategy announces “21/21 Plan” to raise $42 billion for Bitcoin purchases
Plan includes $21B in equity and $21B in debt over 3 years
Company currently holds 252,220 bitcoins worth $18B at $72,000 per bitcoin
MicroStrategy increased “BTC Yield” target range to 6%-10% from 4%-8%
Stock down 10% after hours but up 250% year-to-date

MicroStrategy, under the leadership of Executive Chairman Michael Saylor, has announced an ambitious plan to raise $42 billion over the next three years to purchase more Bitcoin.

The company revealed this strategy, dubbed the “21/21 Plan,” during its third quarter earnings release on Wednesday.

The plan’s name comes from its equal split between funding sources: $21 billion in equity raises and $21 billion in debt offerings.

MicroStrategy aims to execute this strategy through 2027 as part of its ongoing transformation into what it calls a “Bitcoin Treasury Company.”

Phong Le, the company’s president and CEO, explained in the earnings release that the additional capital would be used to acquire more Bitcoin as a treasury reserve asset.

The company’s goal is to achieve a higher “BTC Yield,” a performance metric created by MicroStrategy to measure how effectively they acquire Bitcoin for shareholders.

As of their last disclosure in mid-September, MicroStrategy held 252,220 bitcoins. The company acquired these coins for a total investment of $9.9 billion, averaging $39,266 per Bitcoin.

At the current market price of approximately $72,000, this holdings are valued at over $18 billion.

The company’s most recent Bitcoin purchase occurred in mid-September when it bought 7,420 bitcoins for $458.2 million.

MicroStrategy maintains $891.3 million in available funds from a previous capital raise, ready for future Bitcoin acquisitions.

In addition to announcing the new funding plan, MicroStrategy has revised its target range for BTC Yield. The company now aims for a 6% to 10% yield, up from its previous target of 4% to 8%.

For the third quarter, the company reported a BTC Yield of 17.8%, exceeding both the old and new target ranges.

The announcement has had an immediate impact on MicroStrategy’s stock performance. In after-hours trading following the news, shares dropped by 10%.

However, this decline comes in the context of a strong year for the company’s stock, which has risen approximately 250% since January.

MicroStrategy’s evolution from a business intelligence software company to a Bitcoin-focused enterprise has been marked by steady accumulation of the cryptocurrency since 2020. The new plan represents a major escalation of this strategy.

The size of the planned capital raise puts it among the larger funding efforts in corporate America. The $42 billion target over three years would mean raising an average of $14 billion annually through a combination of stock sales and debt issuance.

The company’s approach involves maintaining its core software business while using its corporate structure to provide investors with exposure to Bitcoin. This model has attracted attention from both traditional investors and cryptocurrency enthusiasts.

MicroStrategy’s strategy has made it the largest corporate holder of Bitcoin, ahead of other public companies that hold the cryptocurrency on their balance sheets.

The planned $42 billion raise would substantially increase this lead if executed as outlined.

The timing of the announcement comes as Bitcoin trades near all-time highs, having recently crossed the $70,000 mark.

The cryptocurrency has seen increased institutional adoption in 2024, particularly following the approval of spot Bitcoin ETFs.

The company’s financial position shows it had $891.3 million in available capital at the end of the third quarter. This provides immediate buying power for additional Bitcoin purchases while the new funding plan gets underway.

The structure of the “21/21 Plan” appears designed to balance the risks of debt financing with the dilutive effects of equity raises. The equal split between debt and equity suggests a measured approach to funding the Bitcoin purchases.

Market reaction to the announcement reflects the scale of the undertaking. While MicroStrategy’s stock has performed well throughout 2024, the 10% after-hours decline indicates investors are processing the implications of such a large capital raising effort.