MSTR 8-K
Strategy Inc (MSTR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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| Item 8.01. | Other Events. |
2029 Convertible Notes Update
As previously disclosed, on November 21, 2024, MicroStrategy Incorporated (“MicroStrategy” or the “Company”) completed a private offering (the “Convertible Notes Offering”) of its 0% convertible senior notes due 2029 (the “2029 Convertible Notes”). The Convertible Notes Offering, which included a conversion premium of approximately 55% over the U.S. composite volume weighted average price of MicroStrategy’s class A common stock from 1:30 p.m. through 4:00 p.m. Eastern Standard Time on November 19, 2024, was well received in the marketplace and upsized to a total of $3.0 billion in aggregate principal amount. This amount included the exercise by the initial purchasers of their option to purchase $400.0 million of additional 2029 Convertible Notes. Net proceeds from the Convertible Notes Offering to MicroStrategy totaled approximately $2.97 billion.
ATM Update
As previously disclosed, on October 30, 2024, the Company entered into a Sales Agreement (the “Sales Agreement”) with TD Securities (USA) LLC, Barclays Capital Inc., The Benchmark Company, LLC, BTIG, LLC, Canaccord Genuity LLC, Cantor Fitzgerald & Co., Maxim Group LLC, Mizuho Securities USA LLC, and SG Americas Securities, LLC, as agents (the “Sales Agents”), pursuant to which the Company may issue and sell shares of its class A common stock, par value $0.001 per share (“Shares”), having an aggregate offering price of up to $21 billion from time to time through the Sales Agents.
On November 25, 2024, the Company announced that, during the period between November 18, 2024 and November 24, 2024, the Company had sold an aggregate of 5,597,849 Shares under the Sales Agreement for aggregate net proceeds to the Company (less sales commissions) of approximately $2.46 billion. As of November 24, 2024, approximately $12.8 billion of Shares remained available for issuance and sale pursuant to the Sales Agreement.
Bitcoin Holdings Update
On November 25, 2024, the Company announced that, during the period between November 18, 2024 and November 24, 2024, the Company acquired approximately 55,500 bitcoins for approximately $5.4 billion in cash, at an average price of approximately $97,862 per bitcoin, inclusive of fees and expenses. The bitcoin purchases were made using proceeds from the Convertible Notes Offering and the issuance and sale of Shares under the Sales Agreement.
As of November 24, 2024, the Company, together with its subsidiaries, held an aggregate of approximately 386,700 bitcoins, which were acquired at an aggregate purchase price of approximately $21.9 billion and an average purchase price of approximately $56,761 per bitcoin, inclusive of fees and expenses.
| Item 7.01 | Regulation FD Disclosure. |
BTC Yield KPI
From October 1, 2024 to November 24, 2024, the Company’s BTC Yield was 35.2%. From January 1, 2024 to November 24, 2024, the Company’s BTC Yield was 59.3%.
BTC Yield is a key performance indicator (“KPI”) that represents the percentage change period-to-period of the ratio between the Company’s bitcoin holdings and its Assumed Diluted Shares Outstanding. Assumed Diluted Shares Outstanding refers to the aggregate of the Company’s actual shares of common stock outstanding as of the end of the applicable period plus all additional shares that would result from the assumed conversion of all outstanding convertible notes, exercise of all outstanding stock option awards, and settlement of all outstanding restricted stock
units and performance stock units. The Company uses BTC Yield as a KPI to help assess the performance of its strategy of acquiring bitcoin in a manner the Company believes is accretive to shareholders. The Company believes this KPI can be used to supplement an investor’s understanding of the Company’s decision to fund the purchase of bitcoin by issuing additional shares of its common stock or instruments convertible to common stock.
BTC Yield and Basic and Assumed Diluted Shares Outstanding
| 12/31/2023 | 9/30/2024 | 11/24/2024 | ||||||||||
| Total Bitcoin Holdings |
189,150 | 252,220 | 386,700 | |||||||||
| Shares Outstanding (in ‘000s) (1) |
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| Class A |
149,041 | 182,995 | 210,837 | |||||||||
| Class B |
19,640 | 19,640 | 19,640 | |||||||||
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| Basic Shares Outstanding (2) |
168,681 | 202,635 | 230,477 | |||||||||
| 2025 Convertible Shares @$39.80 |
16,330 | — | — | |||||||||
| 2027 Convertible Shares @$143.25 |
7,330 | 7,330 | 7,330 | |||||||||
| 2028 Convertible Shares @$183.19 |
— | 5,513 | 5,513 | |||||||||
| 2029 Convertible Shares @$672.40 |
— | — | 4,462 | |||||||||
| 2030 Convertible Shares @$149.77 |
— | 5,342 | 5,342 | |||||||||
| 2031 Convertible Shares @$232.72 |
— | 2,594 | 2,594 | |||||||||
| 2032 Convertible Shares @$204.33 |
— | 3,915 | 3,915 | |||||||||
| Options Outstanding |
12,936 | 5,678 | 5,010 | |||||||||
| RSU/PSU Unvested |
2,359 | 2,034 | 1,867 | |||||||||
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| Assumed Diluted Shares Outstanding (3) |
207,636 | 235,042 | 266,510 | |||||||||
| BTC Yield % (Quarter to Date) |
35.2% | |||||||||||
| BTC Yield % (Year to Date) |
59.3% | |||||||||||
| (1) | On July 11, 2024, the Company announced a 10-for-1 stock split of the Company’s class A common stock and class B common stock. The stock split was effected by means of a stock dividend to the holders of record of the Company’s class A common stock and class B common stock as of the close of business on August 1, 2024, the record date for the dividend. The dividend was distributed after the close of trading on August 7, 2024 and trading commenced on a split-adjusted basis at market open on August 8, 2024. As a result of the stock split, all applicable share and equity award information has been retroactively adjusted to reflect the stock split for all periods presented. |
| (2) | Basic Shares Outstanding reflects the actual class A common stock and class B common stock outstanding as of the dates presented. For purposes of this calculation, outstanding shares of such stock are deemed to include shares, if any, that were sold under at-the-market equity offering programs or that were to be issued pursuant to options that had been exercised or restricted stock units that have vested, but which in each case were pending issuance as of the dates presented. |
| (3) | Assumed Diluted Shares Outstanding refers to the aggregate of our Basic Shares Outstanding as of the end of each period plus all additional shares that would result from the assumed conversion of all outstanding convertible notes, exercise of all outstanding stock option awards, and settlement of all outstanding restricted stock units and performance stock units. Assumed Diluted Shares Outstanding is not calculated using the treasury method and does not take into account any vesting conditions (in the case of equity awards), the exercise price of any stock option awards or any contractual conditions limiting convertibility of convertible debt instruments. |
Important Information about BTC Yield KPI
BTC Yield is a KPI that represents the percentage change period-to-period of the ratio between the Company’s bitcoin holdings and its Assumed Diluted Shares Outstanding. Assumed Diluted Shares Outstanding refers to the aggregate of the Company’s actual shares of common stock outstanding as of the end of each period plus all additional shares that would result from the assumed conversion of all outstanding convertible notes, exercise of all outstanding stock
option awards, and settlement of all outstanding restricted stock units and performance stock units. Assumed Diluted Shares Outstanding is not calculated using the treasury method and does not take into account any vesting conditions (in the case of equity awards), the exercise price of any stock option awards or any contractual conditions limiting convertibility of convertible debt instruments.
The Company uses BTC Yield as a KPI to help assess the performance of its strategy of acquiring bitcoin in a manner the Company believes is accretive to shareholders. The Company believes this KPI can be used to supplement an investor’s understanding of its decision to fund the purchase of bitcoin by issuing additional shares of its common stock or instruments convertible to common stock. When the Company uses this KPI, management also takes into account the various limitations of this metric, including that it does not take into account debt and other liabilities and claims on company assets that would be senior to common equity and that it assumes that all indebtedness will be refinanced or, in the case of the Company’s senior convertible debt instruments, converted into shares of common stock in accordance with their respective terms.
Additionally, this KPI is not, and should not be understood as, an operating performance measure or a financial or liquidity measure. In particular, BTC Yield is not equivalent to “yield” in the traditional financial context. It is not a measure of the return on investment the Company’s shareholders may have achieved historically or can achieve in the future by purchasing stock of the Company, or a measure of income generated by the Company’s operations or its bitcoin holdings, return on investment on its bitcoin holdings, or any other similar financial measure of the performance of its business or assets.
The trading price of the Company’s class A common stock is informed by numerous factors in addition to the amount of bitcoins the Company holds and number of actual or potential shares of its stock outstanding, and as a result, the market value of the Company’s shares may trade at a discount or a premium relative to the market value of the bitcoin the Company holds, and BTC Yield is not indicative nor predictive of the trading price of the Company’s shares of class A common stock.
As noted above, this KPI is narrow in its purpose and is used by management to assist it in assessing whether the Company is using equity capital in a manner accretive to shareholders solely as it pertains to its bitcoin holdings.
In calculating this KPI, the Company does not take into account the source of capital used for the acquisition of its bitcoin. The Company notes in particular, it has acquired bitcoin using proceeds from the offering of its 6.125% Senior Secured Notes due 2028 (which the Company has since redeemed), which were not convertible to shares of the Company’s common stock, as well as from the offerings of its convertible senior notes, which at the time of issuance had, and may from time-to-time thereafter have, conversion prices above the current trading prices of the Company’s common stock, or as to which the holders of such convertible notes may not then be entitled to exercise the conversion rights of the notes. Such offerings have had the effect of increasing the BTC Yield without taking into account the corresponding debt. Conversely, if any of the Company’s convertible senior notes mature or are redeemed without being converted into common stock, the Company may be required to sell shares in quantities greater than the shares such notes are convertible into or generate cash proceeds from the sale of bitcoin, either of which would have the effect of decreasing the BTC Yield due to changes in the Company’s bitcoin holdings and shares in ways that were not contemplated by the assumptions in calculating BTC Yield. Accordingly, this metric might overstate or understate the accretive nature of the Company’s use of equity capital to buy bitcoin because not all bitcoin may be acquired using proceeds of equity offerings and not all issuances of equity may involve the acquisition of bitcoin.
The Company determines its KPI targets based on its history and future goals. The Company’s ability to achieve positive BTC Yield may depend on a variety of factors, including its ability to generate cash from operations in excess of its fixed charges and other expenses, as well as factors outside of its control, such as the availability of debt and equity financing on favorable terms. Past performance is not indicative of future results.
The Company has historically not paid any dividends on its shares of common stock, and by presenting this KPI the Company makes no suggestion that it intends to do so in the future. Ownership of common stock does not represent an ownership interest in the bitcoin the Company holds.
Investors should rely on the financial statements and other disclosures contained in the Company’s SEC filings. This KPI is merely a supplement, not a substitute. It should be used only by sophisticated investors who understand its limited purpose and many limitations.
Furnished Information
The information disclosed pursuant to Item 7.01 in this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: November 25, 2024 | MicroStrategy Incorporated (Registrant) | |||||
| By: | /s/ W. Ming Shao | |||||
| Name: | W. Ming Shao | |||||
| Title: | Senior Executive Vice President & General Counsel | |||||