Is the vacuum cleaner charging? MicroStrategy is not buying Bitcoin this week and is instead "buying bonds," which has received criticism. What do experts think?

MicroStrategy pauses Bitcoin purchases this week to buy bonds, sparking polarized opinions. Critics argue it resembles a Ponzi scheme to fill funding gaps; supporters believe that canceling $1.5 billion in convertible bonds can effectively optimize the financial structure and reduce financing pressure.

MicroStrategy pauses crypto buying this week to buy bonds

Since MicroStrategy (Strategy) planned to sell a small amount of Bitcoin to pay off debt, founder Michael Saylor (5/24) posted again stating that this week they are temporarily halting Bitcoin purchases to buy bonds.

In his post, he likened MicroStrategy to a Bitcoin vacuum cleaner (BitVac), and said the vacuum is currently charging.

According to the latest data from Strategy’s official dashboard, MicroStrategy currently holds 843,738 Bitcoins, accounting for about 4% of the total 21 million Bitcoins issued. As for the asset net value premium (mNAV) data that investors are also concerned about, official figures show it at 1.20.

OnrampBitcoin executive criticizes high-interest fundraising tactics

Saylor’s strategy of not buying Bitcoin this week and switching to bonds has once again raised market doubts.

Glenn Cameron, head of the global institutional division at OnrampBitcoin, pointed out that MicroStrategy is converting zero-interest convertible bonds into STRC perpetual preferred stock with a yield of up to 11.5%. This move aims to address liquidity issues of up to $3 billion within the next 24 months.

Cameron explained that these original zero-coupon bonds due in 2029 can be redeemed at face value by investors at the end of 2027. Since MicroStrategy’s stock price is currently around $187, well below the approximate conversion price of $672, rational investors would demand redemption.

MicroStrategy is now paying about 92 cents on the dollar, spending $1.38 billion in cash to prepay this $1.5 billion debt.

He criticized this approach as akin to a “Ponzi scheme,” issuing perpetual preferred stock to fill recent funding gaps, turning what would naturally mature short-term debt into a permanent high-interest burden on retail investors’ balance sheets.

Analysts and investors optimistic about financial restructuring

Although Cameron’s criticism is that it’s a Ponzi scheme, several investors and analysts also hold a positive view of MicroStrategy’s actions.

Investor FinancialFreedom believes that MicroStrategy’s expenditure of $1.38 billion in cash to cancel $1.5 billion of zero-coupon bonds directly eliminates the potential number of shares that could be converted in the future. This operation can reduce equity dilution, increase the amount of Bitcoin per share for existing shareholders, and immediately save about $120 million.

Blockchain analysis firm Swan analyst Adam Livingston stated that canceling this massive amount of convertible bonds can eliminate maturity risk and help MicroStrategy establish a more solid Bitcoin structure.

James Van Straten, senior reporter and analyst at CoinDesk, mentioned that MicroStrategy sold 704 Bitcoins in December 2022 but bought 2,395 Bitcoins during the same period. He expects that this time’s operation will follow the same logic, with total purchases eventually exceeding sales, and by eliminating debt, aligning with S&P standards.

Additionally, TD Cowen’s report pointed out that repurchasing zero-coupon convertible bonds can improve overall credit quality and significantly ease future refinancing pressures.

Debt repayment strategy sparks Bitcoin selling concerns

MicroStrategy confirmed in filings with the U.S. Securities and Exchange Commission (SEC) that it has reached an agreement with investors to repurchase a batch of “zero-coupon convertible bonds” due in 2029, with settlement expected around May 19.

Regarding the funding source for this $1.5 billion bond repurchase, the company is considering its existing cash reserves, issuing new shares at market prices, and also selling Bitcoin as potential options.

This news has sparked market concerns about whether MicroStrategy is starting to sell assets. To soothe market sentiment, Saylor previously clarified that MicroStrategy will maintain its position as a net Bitcoin holder. If Bitcoin is sold to pay dividends, for every Bitcoin sold, the company will buy back 10 to 20 Bitcoins.

Financial analyst Yu Zhe’an commented that MicroStrategy’s previous stance of absolutely not selling any Bitcoin has been adjusted to a long-term net buyer. This reflects that when a company uses complex financial engineering to support its original ideals, its core values shift into the costs necessary to sustain the financial system.

Further reading:
Is MicroStrategy selling Bitcoin just a small matter? Saylor: It’s just becoming a net buyer; for every Bitcoin sold, they buy 20 more.