Michael Saylor’s Strategy to convert bond debt to equity over the next 3-6 years

Strategy plans to reduce the debt on its balance sheet by converting its $6 billion in convertible bonds into equity over the coming years, according to founder Michael Saylor.

In a Sunday X post, Saylor confirmed the plan in response to a statement from the company’s account, reiterating that the firm can “withstand a drawdown in BTC price to $8,000” before facing any shortfall in covering its debt.

What this essentially means is the world’s largest corporate Bitcoin holder plans to systematically turn the company’s lenders into shareholders by converting outstanding convertible bonds into common equity. This is expected to transpire over the next “3-6 years,” Saylor said.

Currently, the company has a convertible debt load of roughly $6 billion and Bitcoin holdings that amount to approximately $49 billion based on current prices, with more than 714,000 BTC on its balance sheet.

Although the move may be able to shield its aggressive Bitcoin accumulation strategy from refinancing pressure, the conversion could also dilute existing shareholders once the debt is exchanged for newly issued stock.

On Feb. 12, Strategy CEO Phong Le said the company will increasingly rely on perpetual preferred shares such as Stretch (STRC) to fund future Bitcoin purchases while reducing reliance on common stock sales.

Strategy under stress amid Bitcoin volatility

Strategy shares have struggled over the past few months due to Bitcoin’s latest downturn, but rallied over 8% to close at $133.88 on Friday, rallying another 0.24% in after-hours trading, as Bitcoin briefly reclaimed the $70k mark. 

The rally was short-lived, and Bitcoin has receded back towards $68,700 at press time, down roughly 2% in the past 24 hours.

According to data from Bitcoin Treasuries, Strategy is now down over 9.7% on its investment, with an average buying price of $76,052. Meanwhile, the company’s shares are down 70% from their all-time high reached last year.