MicroStrategy’s 5M Share Plan:
Explained in details 👇 🔴 MicroStrategy’s Financial Situation
The company isn’t generating much cash from its regular business.
It’s losing $53 million from operations (operating cash flow) and has a much larger loss of $1.06 billion when factoring in debt (levered free cash flow).
In short, it's spending more than it's earning.
🔴 A Big Debt Is Coming Due
In 2020, MicroStrategy raised $650 million by selling a type of loan called a convertible bond, which must be repaid by December 2025.
The company can either pay back the debt in cash or issue new shares instead.
🔴 The Share Dilution Problem
When the loan was taken, the agreement set a conversion price of $39.80 per share if paid back in stock. But today, MicroStrategy’s stock is trading much higher—around $282 per share.
If they issue shares at the original price, they'd need to create 16.33 million new shares, which would be worth $4.6 billion at today’s price—giving away far more value than the original $650 million debt.
🔴 Bitcoin Profits vs. Debt Risk
The company used the borrowed $650 million to buy Bitcoin at around $10,000 per BTC. Now, with Bitcoin at $80,000, the investment looks like a huge success—on paper.
However, if MicroStrategy is forced to issue shares to cover its debt, the dilution could erase much of those gains.
🔴 The New Borrowing Plan
To avoid issuing undervalued shares, Saylor now plans to borrow another $500 million through a high-interest bond (10% perpetual interest). This new debt would help repay the 2025 loan in cash, preventing dilution.
However, it adds even more financial strain to the company.
🔴 The Risk
Saylor’s strategy hinges on continually borrowing to buy Bitcoin while hoping for higher prices.
If he can’t generate enough cash in time, MicroStrategy might have to issue shares anyway, severely diluting shareholders and potentially causing a stock price crash.
If that happens, the company could struggle to profit from Bitcoin’s rise, despite holding a massive amount of it.
🔴 In short, Saylor is making a high-stakes bet that Bitcoin’s gains will outpace the risks of mounting debt. But if the timing goes wrong, MicroStrategy and its shareholders could take a massive hit.