MicroStrategy's Convertible Notes Attract Hedge Funds
MicroStrategy Inc. (MSTR) is attracting significant interest from hedge funds through its convertible notes offerings. This comes as co-founder Michael Saylor continues his aggressive Bitcoin purchase strategy, which has driven the company's stock price up over 490% this year.
Calamos Advisors LLC, among other major hedge funds, has emerged as a key player in MicroStrategy's $6 billion convertible note issuance this year. These notes, designed to finance the company's growing cryptocurrency holdings, have become attractive vehicles for market-neutral arbitrage strategies.
"Convertibles are a way for issuers to monetize the volatility of their stocks, and MicroStrategy is an extreme example," said Eli Pars, co-chief Investment Officer at Calamos Advisors. His firm holds over $130 million in MicroStrategy notes across various strategies.
Saylor's transformation of the enterprise software company has led to the accumulation of Bitcoin, now valued at approximately $40 billion. This strategy has attracted prominent hedge funds like Linden Advisors, Context Capital, Graham Capital, and Millennium Management. These firms typically employ convertible arbitrage tactics, capitalizing on MicroStrategy's exceptional volatility, which averages 5.2% daily movements compared to the S&P 500's 0.6%.
"It could be a giant house of cards that will crush many shareholders when it crashes."
As of Wednesday, MicroStrategy's stock was trading at $406 after an 8.72% surge. In after-hours trading, the stock rose an additional 1.07%.