| Item 1.01 | Entry into a Material Definitive Agreement. |
Convertible Note Offering
On March 18, 2024, MicroStrategy Incorporated (the “Company”) completed its previously announced private offering of 0.875% convertible senior notes due 2031 (the “notes”). The notes were sold under a purchase agreement, dated as of March 14, 2024, entered into by and between the Company and Citigroup Global Markets Inc., as representative of the several initial purchasers named therein (the “Initial Purchasers”), for resale to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The aggregate principal amount of the notes sold in the offering was $603.75 million, which includes $78.75 million aggregate principal amount of notes issued pursuant to an option to purchase, within a 13-day period beginning on, and including, the date on which the notes were first issued, granted to the Initial Purchasers under the purchase agreement, which the Initial Purchasers exercised in full on March 15, 2024 and which additional purchase was also completed on March 18, 2024.
The net proceeds from the sale of the notes were approximately $592.3 million after deducting the Initial Purchasers’ discounts and commissions and estimated offering expenses payable by the Company.
The Company used the net proceeds from the sale of the notes to acquire additional bitcoin.
Indenture and the Notes
On March 18, 2024, the Company entered into an indenture (the “Indenture”) with respect to the notes with U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The notes are senior unsecured obligations of the Company and bear interest at a rate of 0.875% per year payable semiannually in arrears on March 15 and September 15 of each year, beginning on September 15, 2024. The notes will mature on March 15, 2031, unless earlier converted, redeemed or repurchased in accordance with their terms.
The notes are convertible into shares of the Company’s class A common stock at an initial conversion rate of 0.4297 shares per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $2,327.21 per share of class A common stock). The initial conversion price represents a premium of approximately 40% above the U.S. composite volume weighted average price of the Company’s class A common stock from 9:30 a.m. through 4:00 p.m. Eastern Daylight Time on Thursday, March 14, 2024, which was $1,662.1999. The conversion rate is subject to customary anti-dilution adjustments. In addition, following certain events that occur prior to the maturity date or if the Company delivers a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its notes in connection with such corporate event or notice of redemption, as the case may be, in certain circumstances as provided in the Indenture.
Prior to September 15, 2030, the notes are convertible only upon the occurrence of certain events. On or after September 15, 2030 until the close of business on the second scheduled trading day immediately preceding the maturity date of the notes, holders may convert the notes at any time. Upon conversion of the notes, the Company will pay or deliver, as the case may be, cash, shares of the Company’s class A common stock or a combination of cash and shares of class A common stock, at the Company’s election.
Prior to March 22, 2028, the Company may not redeem the notes. The Company may redeem for cash all or any portion of the notes, at its option, on or after March 22, 2028 if the last reported sale price of the Company’s class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides a notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
