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Business intelligence software company MicroStrategy has announced it is offering $550 million worth of convertible senior notes and intends to use the net proceeds to buy bitcoin.

The company said in a press release on Wednesday that the notes are being offered in a private placement to qualified institutions and are expected to close on December 12.

MicroStrategy estimates the net proceeds from the offer will be around $537.2 million after subtracting necessary expenses and discounts. 

As to the purpose of the offer, the firm said it “intends to invest the net proceeds from the sale of the notes in bitcoin in accordance with its Treasury Reserve Policy pending the identification of working capital needs and other general corporate purposes.”

It remains to be seen how much of the intended issuance will be completed or whether this method of purchasing bitcoin via debt issuance would lead to any pushback from the U.S. Securities and Exchange Commission. 

MicroStrategy said the $550 million offering will be its unsecured and senior debts that bear an annualized interest rate of 0.75% that is payable semi-annually on June 15 and December 15 of each year.

The first payout will begin on June 15 2021 and the notes will mature on December 15, 2025, “unless earlier repurchased, redeemed or converted in accordance with their terms,” the firm said.

MicroStrategy added in the announcement that the conversion rate for the notes will initially be 2.5126 shares of its class A common stock per $1,000 principle amount of notes.

That would translate to an initial conversion price of about $397.99 per share, which stands at a roughly 37% premium over MicroStrategy stock’s closing price at $289 as of December 8.

The announcement comes just two days after MicroStrategy said it was planning to raise $400 million by offering senior convertible notes with the intention to buy bitcoin with net proceeds.

© 2020 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Cryptocurrency asset manager Bitwise has listed the shares of its index fund on over-the-counter (OTC) markets, making them tradeable via traditional brokerage accounts.

Until now, the Bitwise 10 Crypto Index Fund was available to buy via private placements, at net asset value. Now the fund’s listing on OTCQX, a market offered by OTC Markets Group, will make its shares publicly traded.

Bitwise appears to be late to the party. Rival Grayscale’s funds have since long been available on OTC markets. When asked why so, Matthew Hougan, global head of research at Bitwise, told The Block that the firm’s primary clients are “just now starting to allocate to crypto in a major way.”

Bitwise mainly serves financial advisors and investment professionals. Hougan said these clients found the private placement method complicated, involving accreditation, signatures, and wires.

“It was making things incredibly difficult, especially those who wanted to allocate 2% across 100 clients,” said Hougan. “We listened to clients…We then spent a year working with regulators to make it happen.”

The index fund’s shares will be listed under the ticker symbol “BITW,” and it will be available for investors through traditional brokerage accounts such as Fidelity, Charles Schwab, E*Trade and TD Ameritrade.

As BITW is an index fund that tracks the Bitwise 10 Large Cap Crypto Index, it will give investors exposure to the ten largest cryptoassets. As of November 30, the fund held approximately 75% bitcoin and 13% ether, with the remaining 12% allocated across XRP, litecoin, chainlink, tezos, and other cryptocurrencies.

“Index funds have become the dominant way that investors gain exposure to the stock market, and we think that will happen in crypto too,” Hougan told The Block.

© 2020 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

© 2020 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Quick Take

• Blockchain size growth reduces the potential number of nodes and increases the cost of data storage.
• 8% of Bitcoin transactions have OP_RETURN with data as one of the outputs. 90% of them are from Veriblock and Omni.
• It costs roughly $20.2M to write 1GB of data to a smart contract on Ethereum with access to this data from the blockchain.
• Existing decentralized storage solutions do not allow smart contracts to read data from them due to the lack of blockchain interoperability.

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Quick Take

• ‘Fiat Freeway’ is a weekly column providing the latest updates on central bank digital currencies (CBDCs) and stablecoins. 
• This week’s column focuses on the recent backlash the digital assets and financial services industries are facing from Capitol Hill.

This research piece is available to
members of The Block Genesis.
You can continue reading
this Genesis research on The Block.