MicroStrategy's Preferred Offering Means 'Significant Accretion,' Says Analyst — Barrons.com

Mackenzie TatananniMicroStrategy stock isn't for every investor. The company, which does business as Strategy, abandoned its roots in enterprise software as it pursued ambitions to become the world's largest corporate holder of Bitcoin.However, Strategy's latest stock offering presents a gradual growth opportunity for investors itching to get exposure to the cryptocurrency, TD Cowen analyst argued on Tuesday.Analysts led by Lance Vitanza asserted that the company was "hitting its stride" following a public offering of junior perpetual preferred stock. The company issued 11,764,700 shares priced at $85 each on June 10. A non-cumulative dividend rate of 10% per annum applies to a face value of $100 a share.The offering of the so-called STRD (pronounced "Stride") shares will prove to be "highly accretive to common shareholders" over time, Vitanza argued. He noted that the offering raised $1 billion of gross proceeds and "far exceeded initial expectations" for $250 million.Proceeds were promptly used to fund Strategy's latest Bitcoin purchase. From June 9 through June 15, the company snapped up 10,100 Bitcoins in a $1.051 billion transaction financed mostly by the offering.Crucially, the offering "establishes a channel for future high yield fund flows into Bitcoin," Vitanza continued. He anticipates "significant accretion" for common shareholders from the offering itself, "and even greater accretion from potential future issuance."The analyst expects the preferred shares, which have no maturity date and are paid out to shareholders before common stock dividends are distributed, to trade at a higher dividend yield than the company's senior preferred shares.Vitanza rates MicroStrategy common stock at Buy with a $590 price target. The price target implies nearly 60% upside, with MicroStrategy stock down 1.4% at $376.74 on Tuesday.Strategy has more than $63 billion of underlying Bitcoin value compared to $11.6 billion of total debt and preferred outstanding. This number is even lower excluding in-the-money converts.The price of Bitcoin fell steeply on June 12 after Israel launched its initial barrage of attacks on Iran. While enthusiasts may argue that the crypto is a safe-haven asset under certain circumstances, its price is generally subject to volatility during periods of market instability.At last check, the price of the cryptocurrency was down 2.9% over the past 24 hours to $105,487, according to CoinDesk data. The S&P 500 and Nasdaq Composite were down 0.2% and 0.3%, respectively.Strategy's latest Bitcoin acquisition brought the company's total holdings to 592,100 tokens purchased for an aggregate $41.84 million.Even in the face of market instability, Strategy co-founder Michael Saylor has remained upbeat. The company's executive chairman posted a series of tweets seemingly in support of the crypto, including the proclamation "Sometimes you need to fight for Bitcoin," earlier this week.Write to Mackenzie Tatananni at [email protected] content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.