MicroStrategy could raise as much as $600 million from its latest convertible debt offering to purchase more Bitcoin.

However, JPMorgan analysts have reportedly cautioned that the firm’s reliance on debt to purchase Bitcoin could exacerbate a market downturn.

The firm, led by BTC advocate Michael Saylor, has acquired over 15,000 BTC worth nearly $1 billion since the year began, primarily financed through a convertible debt offering.

According to the analysts, this funding approach has turned MicroStrategy into a leveraged player in the Bitcoin arena, amplifying the ongoing market rally.

They added that such debt-funded Bitcoin acquisitions contribute to market froth and increase the likelihood of more significant deleveraging in future downturns.

Despite Bitcoin’s recent surge to a record-breaking high of over $73,000, a sharp downturn has occurred, with prices dipping approximately 4% to around $68,000 as of press time, according to CryptoSlate’s data.

Pricing details

According to a March 15 statement, MicroStrategy plans to price its latest issuance of senior convertible notes at $525 million, with purchasers also granted an option to acquire up to an additional $78.5 million of the offering.

As such, the anticipated proceeds from this offering range between $515 million and approximately $592.3 million. The notes are slated to mature by March 2031, carrying an annual interest rate of 0.875%, payable semi-annually.

Investors who hold these notes will enjoy certain rights like the ability to request repurchase under certain conditions. Additionally, they will retain the flexibility to convert their notes into either cash or shares of MicroStrategy’s class A common stock.

The conversion rate for these notes stands at $2,327.31 per share, marking a premium of roughly 40% over MicroStrategy’s average share price of $1662.20.

The private offering targets qualified institutional buyers and remains subject to prevailing market conditions and other pertinent factors. Its sales would close by March 18.