Morning Commentary: MicroStrategy prices second convertible deal as crypto rally fades

By Abigail W. Adams

Portland, Me., March 15 – The convertibles primary market capped a crypto-focused week with MicroStrategy Inc. pricing its second convertible notes offering in two weeks.

The opportunistic capital raise came on the heels of MicroStrategy’s highly successful $800 million issue of 0.625% convertible notes due 2030 that priced on March 5.

It also trailed Coinbase Global Inc.’s heavily oversubscribed $1.1 billion offering of 0.25% convertible notes due 2030 that priced on Wednesday.

MicroStrategy’s latest offering played to solid demand during book building although the exuberance seen in the previous deal seemed to fade alongside Bitcoin’s rally.

The new paper hit the secondary space on a mixed day for equities as broader markets remain focused on the Fed and rate cuts.

The Dow Jones industrial average was down 72 points, or 0.19%, the S&P 500 index was down 0.34%, the Nasdaq Composite index was down 0.54% and the Russell 2000 index was up 0.30% shortly before 11 a.m. ET.

There was $145 million in reported convertible bond trading volume about one hour into the session with MicroStrategy’s new and recently priced convertible notes accounting for almost half of the total activity in the space.

MicroStrategy’s new convertible notes were putting in a strong performance with the notes holding above par and making large dollar-neutral gains while the 0.625% convertible notes due 2030 traded lower alongside stock.

MicroStrategy solid

MicroStrategy priced an upsized $525 million of seven-year convertible notes after the market close on Thursday at par at the cheap end of talk with a coupon of 0.875% and an initial conversion premium of 40%.

The greenshoe was also upsized to $78.75 million.

The initial size of the offering was $500 million with a greenshoe of $75 million.

The new paper saw a strong start in the aftermarket, although it did not replicate the explosive gains of the 0.625% notes.

The new paper was holding above par with stock off as much as 5%.

They were trading at 100.625 versus a stock price of $1,614 early in the session.

The notes expanded 1.5 points to 2 points dollar-neutral, a source said.

There was $45 million in reported volume.

MicroStrategy’s 0.625% convertible notes also saw heavy volume with the notes lower outright alongside stock.

They were trading at 130 versus a stock price of $1,636 early in the session.

The notes were largely moving in line dollar-neutral, a source said.

There was $20 million in reported volume.

MicroStrategy’s stock was down as much as 5% in early trade but pared losses to trade at $1,665.05, a decrease of 0.70%, shortly before 11 a.m. ET.

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