MicroStrategy Seeks $2B from Perpetual Preferred Stock Sale: Benchmark Insights

MicroStrategy’s strategy to expand its bitcoin holdings through perpetual preferred stock was recently discussed during an investor meeting hosted by Benchmark. Michael Saylor, Executive Chairman of MicroStrategy, provided insights into the company’s plans to raise $2 billion through one or more offerings of perpetual preferred stock. This announcement comes after the company has consistently employed methods such as cash on hand, at-the-market offerings, and convertible bond offerings to accumulate bitcoin since adopting its treasury strategy in August 2020.

On January 3, the company confirmed that it would offer this capital-raising mechanism, a departure from its usual methods. The perpetual preferred stock, a financial instrument with no set maturity date, will provide fixed dividend payments but lacks voting rights for shareholders. Unlike convertible bonds, which typically have a duration of four to eight years, perpetual preferred stock provides MicroStrategy with long-term capital stability, as it remains in place indefinitely unless the company opts to redeem it.

The advantage of this capital structure, according to Saylor, is that it provides the company with an embedded, indefinite call option. Additionally, this form of stock is expected to generate a mid-single-digit yield with low volatility, making it an appealing investment option for large institutions, such as pension funds and banks, who would benefit from its steady, predictable returns.

Although the exact terms of the perpetual preferred stock have not been revealed, it’s anticipated that the offering will occur in the first quarter of 2025, with terms including dividend payments, the potential for conversion into class A common stock, and provisions for share redemption.

Benchmark has maintained its buy rating on MicroStrategy with a price target of $650, and the company continues to expand its bitcoin holdings, recently purchasing 2,530 BTC, bringing its total holdings to 450,000 BTC. In addition, the company is preparing for its Special Meeting for Shareholders on January 21 to vote on increasing authorized class A common stock and preferred stock. MicroStrategy’s Q4 earnings call is scheduled for February 4.