Disclaimer: The analyst who wrote this article owns shares in Strategy.
Strategy (MSTR) Aggressive Bitcoin
The acquisition strategy dramatically increased the value of convertible debt.
As Bitcoin is approaching record prices, and its stock rebounds to $450, five of its six bonds are deeper in money. In other words, the stock price exceeds the conversion price. Only the 2029 memo, which has a high conversion price of $672.40, remains out of reach.
Virginia’s Tysons Corner issued a conceptual memo totaling $8.2 billion with an ultra-low average coupon of just 0.421%. A bond that matures between 2028 and 2032 will have a price set based on MSTR and BTC levels at the time of the issue where the obligation can be converted to common stock.
MSTR stocks were rebounded three months ago from a low of $235, ahead of the $543 record late last year. The rally boosts the market value of the bond to $13.4 billion, and outpacing the expected value of approximately $5.2 billion. Premiums reflect how willing investors pay in the secondary market, driven by the possibility of bonds converted into valuable fairness.
However, recently, the strategy has paused the issuance of new convertible notes. It may be due to more careful sentiment, as reflected in the options market.
As of July 15th, MSTR’s implicit volatility was at 53.1%, well below the previous highs, above 200%. Implicit volatility shows how much they believe in options that traders believe stocks will move in the future based on market positioning.
Open interest remains healthy for contracts above 2.4 million, but both open interest put-in call ratios (0.93) and volume put-in call ratios (0.62) show neutral sentiment, suggesting that traders are not actively betting on a big surge in stock. Puts are a prudent position that provides protection against price drops on underlying assets, and calls are a bullish way in which traders can make money when they rise.
Furthermore, trading volume is only 20% of the 30-day average, suggesting a decline in speculative interest.
This muted option activity means that MSTR prices are high enough to put five of the six convertible debt deep in the money, but there may not be a bubble-filled market enthusiasm that allows the company to issue convertibles in ultra-low coupons and lucrative terms.
Investors may request a higher yield or lower conversion price for new issuances that could dilute existing shareholders more quickly.
