Disclaimer: The analyst, who wrote this article, owns shares in the strategy.
Strategy (Mstr) Aggressive Bitcoin
Acquisition strategy has dramatically increased the value of its convertible debt.
With Bitcoin Steady near its record price and the company’s shares that rebuild against $ 450, five of the six outstanding bonds are deep in the money, which means the stock price exceeds their conversion prices. Only 2029 -note, with a high $ 672.40 conversion price, remains out of reach.
The Tyson’s Corner, Virginia-based company issued convertible notes totaling $ 8.2 billion in the nominal principal with ultra-low average coupons of only 0.421%. The bonds that mature between 2028 and 2032 have a fixed price based on Mstr and BTC levels at the time of questions where the debt can become the common share.
The MSTR share is rebound from as low as $ 235 three months ago and is within the sight of late last year’s $ 543 record. The rally has pushed the market value of bonds to $ 13.4 billion, approx. $ 5.2 billion over their nominal value. The prize reflects how much investors are willing to pay in secondary markets, driven by the bonds to convert to valuable equity.
Of late, however, the strategy has a break with the issuance of new convertible notes. It may be due to a more cautious mood, as reflected in the option for options.
From July 15, Mstr’s implied volatility is 53.1%, far below the heights above 200%. Implicated volatility is an indication of how much the options that dealers believe the stock will move in the future based on their market positioning.
Open interest rates remain healthy to over 2.4 million contracts but both open interest-call ratio (0.93) and the volume that sets the call (0.62) Indicate neutral mood, suggesting that dealers do not aggressively focus on a greater increase in the stock. A put is a careful position that provides protection against price drop in the underlying asset, while a call is a bullish instrument that allows traders to make money as the price rises.
In addition, trade volume is only 20% of its 30-day average, which suggests reduced speculative interest.
This muted option activity implies that although Mstr’s price is high enough to put five of the six convertible bonds deep inside the money, there may not be the same foamy market enthusiasm that allowed the company to issue convertible by ultra-low coupons and favorable conditions.
Investors may require higher yields or lower conversion prices for any new issue that can dilute the existing shareholders before.
