MicroStrategy Unveils '21/21 Plan' to Raise $42B for Bitcoin Purchases

MicroStrategy revealed plans to raise $42 billion in fresh capital for bitcoin purchases over the next three years

MicroStrategy Inc. announced plans to raise $42 billion in fresh capital for bitcoin purchases over the next three years, according to its Q3 2024 earnings release on October 30, 2024.

The company, which holds 252,220 bitcoins as of September 30, 2024, is the largest publicly traded company bitcoin holder worldwide, according to Coingecko data.

Now, MicroStrategy is aiming to secure $21 billion through equity offerings and another $21 billion via fixed-income securities between 2025 and 2027.

"Our focus remains to increase value generated to our shareholders by leveraging the digital transformation of capital. Today, we are announcing a strategic goal of raising $42 billion of capital over the next 3 years, comprised of $21 billion of equity and $21 billion of fixed income securities, which we refer to as our '21/21 Plan,'" said Phong Le, President and Chief Executive Officer, MicroStrategy in a press release statement.

The "21/21 Plan" of MicroStrategy targets $42 billion in fresh capital for 2025-2027. The plan splits evenly between two sources: $21 billion from new stock offerings and $21 billion through fixed-income securities, according to MicroStrategy Q3 2024 earnings release.

"We are basically creating leverage by tapping into the convertible bond market," Michael Saylor, Executive Chairman of MicroStrategy, said at a Bernstein event this month, according to Bloomberg. "Over time, we'll explore the fixed income market; we'll look at issuing preferred shares – things that are, in essence, a swap."

The capital raising schedule shows a steady increase:

To measure efficiency of bitcoin purchases against new share issuance, MicroStrategy uses a BTC Yield metric. For every 100 new shares issued, the company aims to buy enough bitcoin to maintain 106-110 bitcoins per share from 2025 to 2027. In 2024, they exceeded this goal, reaching almost 118 bitcoins per share.

The company's bitcoin holdings reached a market value of $16.007 billion at the end of Q3 2024, with bitcoin priced at $63,463. MicroStrategy acquired these holdings at a total cost of $9.904 billion, averaging $39,266 per bitcoin, according to its Q3 earnings release.

MicroStrategy raised $2.1 billion in Q3 2024 to expand its bitcoin holdings in two ways:

The company used the new bond money to pay off its older, more expensive debt - $500 million of Senior Secured Notes with 6.125% interest rate. The company's cash reserves stayed around $46 million, similar to the end of 2023.

MicroStrategy Cuts Borrowing Costs

MicroStrategy owes $4.3 billion in total debt with a low average interest rate of 0.811%. The company reduced its yearly interest payments by $24 million after replacing expensive loans with cheaper ones in Q3 2024, according to its earnings release.

A key change: MicroStrategy paid off its $500 million loan that required bitcoin as collateral. Now, all 252,220 bitcoins owned by the company are free from any loan obligations.

The Bitcoin Strategy Shows Strong Growth

MicroStrategy increased its bitcoin holdings by 11% in Q3 2024, bringing the total to 252,220 bitcoins. The company's BTC Yield - the rate at which bitcoin holdings grow compared to share count - reached 17.8% in 2024. For investors who bought MicroStrategy stock when the company started buying bitcoin in August 2020, the return stands at 1,989%, according to Q3 2024 earnings data.

Looking ahead, MicroStrategy mapped out three main goals: