For the first time ever, MicroStrategy admitted that over the course of a single week, it diluted all four classes of the company’s public securities.
The liquidations are classed as accretive dilution because the sales allow the company to buy slightly more bitcoin (BTC) than the proceeds of its sales.
This is only possible, of course, because investors bid up its shares to a premium to its BTC holdings, and founder Michael Saylor obviously hopes to continue attracting bids that maintain it.
The company made $472 million in net proceeds by dumping shares of MSTR, STRK, STRF, and STRD at-the-market (ATM). By immediately diluting prior shareholders in each category, the company then bought the same amount of BTC.
This confusing exercise — diluting shareholders to buy BTC for shareholders — has become commonplace at MicroStrategy.
By focusing on the 21 million supply cap of BTC and its potential for parabolic price appreciation, the company slowly adds risky leverage to its balance sheet to gobble up more of the limited supply of BTC.
Read more: Bitcoin boom adds billions to these government holdings
MicroStrategy still trading at a cushy BTC multiple
Gaining affirmation from Wall Street for this behavior, the company’s common stock enjoys a generous 1.7X multiple to its $72 billion BTC treasury.
Indeed, the company now owns 601,550 BTC or 2.9% of its maximum supply. Vanishingly few entities with larger holdings remain: Blackrock’s IBIT ETF, Satoshi Nakamoto, and a few others.
MicroStrategy holds even more BTC than Binance.
The company’s most recent 8-K filing disclosed its sale of 797,008 common MSTR shares plus 573,976 STRK, 444,005 STRF, and 158,278 STRD.
STRK, STRF, and STRD are dividend-yielding preferred stocks that are senior to common shareholders but junior to debtholders.
MicroStrategy promptly used the money to buy 4,225 BTC at an average price of $111,827 per coin. The currency then rallied north of $122,000 after its purchases last week — putting every purchase by the company in profit.
The company’s cost basis is $71,268. As of publication time, the unrealized return on that investment exceeds 68%.
