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Ok, Bitcoiners...here's a quick 101 on convertible bonds from a former evil banker
- A convert bond starts as a bond then "converts" to equity
- Pay lower interest to investors b/c it can be equity later - its cheap now (especially now) but you'll pay later w/ equity dilution
- A convert bond starts as a bond then "converts" to equity
- Pay lower interest to investors b/c it can be equity later - its cheap now (especially now) but you'll pay later w/ equity dilution
- Usually there's bad credit or expect high growth
- Why do investors like it? Protection. If the stock
,you'll still have the value of your bond. If the stock 
,then you convert. BUT....most converts are "callable" aka they'll force a convert if price is > than $ of the bond
- Why do investors like it? Protection. If the stock
,you'll still have the value of your bond. If the stock ,then you convert. BUT....most converts are "callable" aka they'll force a convert if price is > than $ of the bond
- Basically it is downside protection w/ a profit cap vs. owning straight equity
- Tesla is famous for this. The street thought Elon was
absolutely nuts for insisting on raising convert after convert as he believed in his growth (they've recently stfu for some reason...)
- Tesla is famous for this. The street thought Elon was
absolutely nuts for insisting on raising convert after convert as he believed in his growth (they've recently stfu for some reason...)
- Turning to MicroStrategy...they have essentially no debt. No RCF or term loan. Their biggest liability are leases
- They're consistently made stock repurchases - ~$530M in FY19 and already approved ~$800M to repurchase by April 2023. They're prepped for dilution
- They're consistently made stock repurchases - ~$530M in FY19 and already approved ~$800M to repurchase by April 2023. They're prepped for dilution
TL;DR: Rates are super low & a convert fits MSTR debt profile. BUT this is a massive bet on Bitcoin and aligns the company's future with it. If BTC continues to pump, the stock price will and they're
. If not...don't ask Saylor for an xmas gift, he's got other sh*t to pay off.
and they're. If not...don't ask Saylor for an xmas gift, he's got other sh*t to pay off.
