Michael Saylor's MicroStrategy ramps up junk-bond borrowing to plow $500 million more into bitcoin

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Michael Saylor's MicroStrategy ramps up junk-bond borrowing to plow $500 million more into bitcoin
MicroStrategy boss Michael Saylor is one of the most prominent bitcoin bulls.Joe Raedle/Getty Images
  • Michael Saylor's MicroStrategy borrowed $500 million to buy bitcoin - $100 million more than expected.
  • The business software company issued 7-year bonds with an interest rate of 6.125%.
  • MicroStrategy is committed to bitcoin despite flagging a $284.5 million loss due to the price crash.

Crypto bull Michael Saylor has doubled down on his company's huge bets on bitcoin, borrowing $500 million through junk bonds to plow into the cryptocurrency - $100 million more than expected.

MicroStrategy - Saylor's business software company based in Virginia - said on Tuesday that it had sold $500 million of high-yield bonds, otherwise known as junk, which will pay an annual rate of interest of 6.125% and are due in 2028. They are believed to be the first bonds directly linked to the purchase of bitcoin.

The offering was larger than the $400 million the company had originally planned to sell. MicroStrategy received around $1.6 billion in orders, Bloomberg reported, citing people with knowledge of the matter, and received interest from a large number of hedge funds. MicroStrategy has been contacted for comment.

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Saylor is one of the most bullish bitcoin advocates in the market. MicroStrategy now owns around 92,000 bitcoin - worth about $3.2 billion on Wednesday - and has previously issued debt to buy the crypto asset. The company estimated that the latest bond offering will give it $488 million to buy more bitcoin.

Yet Saylor's strategy of raising money to buy more bitcoin through high-yield bonds comes with risks, given the cryptocurrency's wild volatility.

MicroStrategy said on Tuesday that it expects to take a loss of $284.5 million in the second quarter due to the 42% drop in the value of bitcoin since the end of March.

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Bitcoin was trading at around $34,300 on Tuesday, more than 45% below its record high of close to $65,000 touched in April. It has tumbled after Tesla boss Elon Musk criticized the token and China intensified its scrutiny of the market.

MicroStrategy stock ended Tuesday at $459.38, more than 60% below a peak of around $1,272 hit in February. Yet it was up more than 260% compared to a year earlier.

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