Benchmark: MicroStrategy may soon generate revenue by lending out its Bitcoin holdings
MicroStrategy completed a $1.01 billion convertible note issuance this month and purchased 7420 BTC from September 13 to 19, valued at approximately $458.2 million.
Investment bank and research firm Benchmark stated that this latest move indicates that as MicroStrategy issues convertible notes to raise funds for increasing its Bitcoin holdings, the company's balance sheet and financial condition may become stronger.
Benchmark's Mark Palmer pointed out that MicroStrategy Executive Chairman Michael Saylor occasionally mentions the idea of lending part of MicroStrategy's Bitcoin for income, but he believes it is not feasible because there are no trading counterparts with financial strength and robust balance sheets willing to accept such a move. However, this situation may soon change.
At a public hearing last week, Senator Cynthia Lummis' chief legal advisor revealed that the U.S. SEC has granted conditional exemption to BNY Mellon regarding its SAB 121 guidance which requires entities choosing to custody crypto assets list them on their balance sheets and create corresponding liabilities equal in value to the crypto assets. The largest custodian in America, BNY Mellon appears to have been approved for cryptocurrency custody.
Palmer said if SEC’s lenient stance towards digital assets extends from financial institutions like BNY Mellon due to rising institutional interest into corporations then MicroStrategy could soon be dealing with large institutional trading counterparts.
He wrote in Tuesday’s report: "The income generated by MSTR through lending some Bitcoins can offset its annual debt interest. If the company is willing to lend more Bitcoins then it can use related earnings as another way of increasing Bitcoin holdings without any concerns about leverage or dilution."
Palmer noted after issuing convertible bonds and revoking preferred notes; MicroStrategy might have gained greater flexibility entering capital markets since it reduced interest expenses while having more unsecured Bitcoin reserves.
Palmer reiterated his “buy” rating on MicroStrategy stock with a target price of $215 USD per share. So far this year, MSTR has risen more than 115%, with a share price of about $147 USD at the time of publication.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Japanese Yen: Policy delay risks weakness against US Dollar - Commerzbank
IMF: Global debt will exceed GDP in 2029
The latest forecast from the IMF shows that global public debt will exceed 100% of GDP by 2029, two years earlier than previously expected. The IMF Managing Director issued a rare warning, specifically naming the United States’ debt path as “unsustainable” and pointing out that fiscal consolidation in various countries is seriously lagging. What's even more dangerous is that persistent inflation may force the Federal Reserve to continue raising interest rates, increasing financing costs and creating a vicious cycle of "high debt—high interest rates—even higher debt."
Report: Samsung’s HBM4/HBM4E production may double next year, with product share rising from 40% to 80%
Samsung is betting on AI storage chip upgrades: next year, the production of the HBM4 series may at least double, with overall HBM monthly wafer input increasing by nearly 40%. The share of high-end product shipments will jump from 40% to 80%. Glass substrate demand will increase fivefold in two years, reflecting accelerated capacity expansion of advanced stacking technology, with supply chain orders simultaneously benefiting.
Crypto prices
More
