(Bloomberg) —

MicroStrategy Inc. is borrowing $400 million to buy more Bitcoin while also writing down the value of its existing holdings. It’s the first-ever junk bond sale used for financing purchases of the volatile cryptocurrency.

The Tysons Corner, Virginia-based enterprise software company said in a filing Monday that the senior secured notes will be available to qualified institutional buyers. The private placement is $23 million higher than the company’s entire operating cash flow since 2016, according to Bloomberg data. MicroStrategy, in a separate filing, said that it’s taking a roughly $284.5 million charge during its next earnings report thanks to losses related to fluctuations in the price of the digital asset. That amounts to more than its cumulative earnings since 2011.

MicroStrategy has, with Michael Saylor at its helm, emerged as one of the most bullish public companies on cryptocurrencies. It has already issued convertible bonds worth around $1 billion in its quest to scoop up more of the coins. Saylor’s focus on Bitcoin, including making it an official corporate strategy, has drawn the ire of critics.

“The $400 million in debt isn’t being used to fund an acquisition or growth. It’s being used to speculate on a volatile asset,” said Marc Lichtenfeld, chief income strategist at the Oxford Club. “Does MicroStrategy even have a business anymore or is it simply a proxy for Bitcoin — with borrowed money?”

Accounting rules likely forced the firm to write down Bitcoin once the market value dipped below the price at which it acquired the coin. That means any Bitcoin bought this year could be written down when the cryptocurrency touched $30,000 briefly last month, unless some of the purchases took place during the handful of days when it traded below that point at the start of the year.

Prior to today’s impairments announcement, MicroStrategy had already taken about $265 million in charges. That brings the total amount of impairments to more than $500 million, according to its filings and data compiled by Bloomberg.

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The firm is marketing the offering through Tuesday, and pricing is expected thereafter, according to a person with knowledge of the matter. The notes will mature in seven years and can’t be bought back for three. Jefferies Financial Group Inc. is the sole bookrunner on the deal, said the person, who asked not to be identified as the details are private.

Saylor has been one of leading advocates of converting company cash to Bitcoin, saying that the Federal Reserve’s relaxing of its inflation policy helped convince him to invest MicroStrategy’s reserves. The company’s disclosures around Bitcoin and its foray into the digital-assets space served as one of the catalysts to the coin’s red-hot rally in 2020 and early 2021, before it tumbled last month. The coin on Monday traded around $36,460, down roughly $28,000 from its mid-April record.

Earlier this year, Tesla Inc. surfaced as one of the few mainstream companies to follow MicroStrategy’s move to buy Bitcoin, but its chief executive officer, Elon Musk, has since then raised issues over the coin’s environmental impact. Since then, the two CEOs said they’re working with major North American Bitcoin miners to discuss “energy usage transparency.” The group agreed to form the Bitcoin Mining Council “to standardize energy reporting.”

In mid-May, the MicroStrategy disclosed that it holds approximately 92,079 Bitcoins, which it says were acquired for about $2.25 billion at an average of about $24,450 per token. Monday’s filing shows the company’s existing cache of Bitcoins will be held by a newly formed subsidiary called MacroStrategy LLC.

(Adds impairment charge in the first paragraph, comment in the fourth paragraph.)

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