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MicroStrategy, led by Michael Saylor, is set to propose a major increase in authorized Class A shares to help fund its Bitcoin buying strategy. As per a report from Bloomberg, analysts expect MicroStrategy’s proposal to raise authorized shares to 10.3 billion to pass easily on January 21, with Michael Saylor controlling about 47% of the voting power.
Remarkably, MicroStrategy could have more outstanding shares than all but four of the five largest Nasdaq 100 companies. The company had announced its plans to raise $42 billion over three years to buy Bitcoin, nearly doubling its holdings to over $44 billion through 10 consecutive weekly purchases.
MicroStrategy: The Wall Street Favorite
Typically, investors would oppose share increase because it dilutes earnings per share, shareholder equity, and voting rights. However, investors would not care in this case as MicroStrategy’s 2,500% gain since adopting its Bitcoin strategy in 2020 has made it a Wall Street favorite, with Bitcoin also skyrocketing nearly 800% in the same period.
While MicroStrategy has a large number of authorized shares over 10 billion, but not all may be sold. Despite issuing over $21 billion in shares, only about 43 million have been sold so far. Class A shareholders have limited voting power, as most of the voting control is held by Class B shares, mainly owned by Michael Saylor.
MicroStrategy’s Unique Strategy
The company plans to raise up to $2 billion through preferred stock offerings, which would take priority over Class A shares. On January 21, shareholders are expected to approve an increase in authorized preferred stock from 5 million to 1 billion shares.
Notably, MicroStrategy intends to use these additional shares for stock transactions, equity offerings, and to settle convertible notes. MicroStrategy’s plan to have such a large increase in shares at one time would be unique, as per Michael Lebowitz, a portfolio manager at RIA Advisors. He noted that no company has ever done anything of this magnitude.
He also warned that increasing share offerings without increasing debt could reduce the company’s leverage, which investors view as a key factor in its Bitcoin strategy.
Bitcoin Nears $105,000
Bitcoin reached its highest price in almost a month on Friday as it neared $105,000 ahead of President-elect Donald Trump’s inauguration. Bitcoin has climbed nearly 12% over the past week as inflation fears eased. Analysts have pointed out that while the market is optimistic about a crypto-friendly president, it will take time for Trump to act on his proposals. Bitcoin is currently trading at $104,934, up over 5% in the past day.