MicroStrategy, the largest corporate holder of Bitcoin, has proposed a substantial increase in its authorized shares to enhance its ability to pursue its Bitcoin-focused strategy. The software company is seeking shareholder approval to raise its Class A common shares from 330 million to 10.33 billion and its preferred shares from 5 million to 1.005 billion, according to a proxy statement filed with the Securities and Exchange Commission (SEC).
The move comes as part of MicroStrategy’s ambitious “21/21” plan, a three-year strategy aimed at securing $42 billion in capital.
MicroStrategy currently has 330 million shares outstanding, meaning this could increase share count by 3,000%.
What does this mean? Here is explain. ( (Source: Reddit\XGramatik):
Here’s the filing MicroStrategy just made with the SEC. Total share could would rise from 330 million to 10.33 BILLION if it is approved. Many are calling this dilutive while others are saying this is the start of a major run for MSTR.
First, MicroStrategy’s 21/21 plan that was announced in October 2024 is a crucial part of why they are doing this. The plan was to raise $42 billion by 2027 to finance more Bitcoin purchases. It has since achieved that goal, now holding 444,262 BTC worth ~$41.8 billion.
he bullish argument is that this proposal allows MicroStrategy the ability to issue more shares in the future. This proposal will allow 10 billion shares to be issued, but this does NOT mean 10 billion shares are coming at once. They can uses these issuances to buy Bitcoin.
Currently, MicroStrategy is capped at 330 million shares of common stock with 225 million outstanding.
A 10-1 stock split (non-dilutive) would bring share count to 3.3 billion. This proposal gives MSTR flexibility to do future ATMs, convertible note offerings and stock-splits.
Why do they need the ability to do this? Because it’s their entire “business model:”
- Borrow money through 0% convertible notes
- Buy Bitcoin and drive price higher
- Sell new shares at premium and buy more bitcoin
- Repeat
Bears will say this is unsustainable.
The bearish argument is that issuing more shares will objectively be dilutive to shareholders. In an already levered Bitcoin play, MicroStrategy is adding dilution and the ability for raise much more debt. Bears say the company itself it built on unsustainable debt.
After all, the company has negative net income, losing -$340 million during Q3 2024. They also posted negative cash flows from operating activities and the business itself is declining. Bears argue that in the wake of a Bitcoin downturn, MSTR cannot service this debt.
However, bulls will say that the recent run in MicroStrategy’s stock has NOTHING to do with its underlying business. The underlying business has effectively been in a linear decline for a decade now. MSTR is no longer a business, it is a levered proxy for Bitcoin.
It is worth noting that many large companies have north of 10 billion shares outstanding. Apple has ~15.2 billion shares outstanding. Microsoft and Amazon currently have ~7.5 billion and ~10.5 billion shares outstanding. But, these are fundamentally different companies.
For MSTR to continue buying Bitcoin, this proposal would need to pass. Their 330M Class A shares will be tapped out after they finish the current ATM and max out the $21B in convertible bonds. Of course, MicroStrategy’s entire strategy revolves around these issuances.
Now for the million dollar question: will this proposal pass? The answer is that it will VERY LIKELY pass. Why? Because Michael Saylor himself currently holds 46.8% of the voting power. If just ~4% of remaining shareholders approve, then it will pass which is highly likely.
In summary, bulls will call this the next big thing for MSTR while bears will call this 97% share dilution.
If MSTR wants to continue raising capital, they will need this to pass.
