Michael Saylor’s company, Strategy Inc., raised $2 billion in a convertible debt deal last week, sparking concerns that the market for crypto-related paper is nearing saturation. Despite the recent surge in activity, the market may be experiencing “crypto fatigue,” with investors becoming more selective about which companies to invest in.
The trend suggests that firms rapidly selling equity-linked notes to fund cryptocurrency purchases are struggling to attract investors at favorable terms. Strategy’s share price premium to the value of its Bitcoin holdings has compressed from over 300% in November to below 200%, a change affecting the volatility profile of the underlying stock.
Industry experts point out that the market is becoming increasingly investor-friendly, with issuers offering higher coupon payments or lower conversion premiums than in recent offerings. However, this may be a sign of an oversaturated market, as investors become more cautious about investing in companies with high Bitcoin acquisition costs.
The game plan for firms like Strategy involves selling shares and debt instruments to investors who believe in the company’s vision or want to profit from the stock’s volatility. But if Bitcoin prices fall, these investments could be vulnerable to significant losses.
Source: https://finance.yahoo.com/news/strategy-latest-convertible-bond-spurs-173931140.html