Item 1.01 Entry into a Material Definitive Agreement.
Convertible Note Offering
On December 11, 2020, MicroStrategy Incorporated (the "Company") completed its
previously announced private offering of 0.750% convertible senior notes due
2025 (the "notes"). The notes were sold under a purchase agreement, dated as of
December 8, 2020, entered into between the Company and Jefferies LLC (the
"Initial Purchaser"), for resale to qualified institutional buyers pursuant to
Rule 144A under the Securities Act of 1933, as amended (the "Securities Act").
The aggregate principal amount of the notes sold in the offering was
$650 million, which includes notes issuable pursuant to an option to purchase,
within a 13-day period beginning on, and including, the date on which the notes
are first issued, up to an additional $100 million aggregate principal amount of
the notes granted to the Initial Purchaser under the purchase agreement, which
the Initial Purchaser exercised in full on December 9, 2020 and which additional
purchase was also completed on December 11, 2020.
The net proceeds from the sale of the notes were approximately $634.9 million
after deducting the Initial Purchaser's discounts and commissions and estimated
offering expenses payable by the Company.
The Company intends to invest the net proceeds from the sale of the notes in
bitcoin in accordance with its Treasury Reserve Policy pending the
identification of working capital needs and other general corporate purposes.
Indenture and the Notes
On December 11, 2020, the Company entered into an indenture (the "Indenture")
with respect to the notes with U.S. Bank National Association, as trustee (the
"Trustee"). The notes are senior unsecured obligations of the Company and bear
interest at a rate of 0.750% per year payable semiannually in arrears on June 15
and December 15 of each year, beginning on June 15, 2021. The notes will mature
on December 15, 2025, unless earlier converted, redeemed or repurchased in
accordance with their terms.
The notes are convertible into shares of the Company's class A common stock at
an initial conversion rate of 2.5126 shares per $1,000 principal amount of notes
(equivalent to an initial conversion price of approximately $397.99 per share of
class A common stock). The initial conversion price represents a premium of
approximately 37.5 % above the last reported sale price of $289.45 of the
Company's class A common stock on the Nasdaq Global Select Market on December 8,
2020. The conversion rate is subject to customary anti-dilution adjustments. In
addition, following certain events that occur prior to the maturity date or if
the Company delivers a notice of redemption, the Company will increase the
conversion rate for a holder who elects to convert its notes in connection with
such corporate event or notice of redemption, as the case may be, in certain
circumstances as provided in the Indenture.
Prior to June 15, 2025, the notes are convertible only upon the occurrence of
certain events. On or after June 15, 2025 until the close of business on the
second scheduled trading day immediately preceding the maturity date of the
notes, holders may convert the notes at any time. Upon conversion of the notes,
the Company will pay or deliver, as the case may be, cash, shares of the
Company's class A common stock or a combination of cash and shares of class A
common stock, at the Company's election.
Prior to December 20, 2023, the Company may not redeem the notes. The Company
may redeem for cash all or a portion of the notes, at its option, on or after
December 20, 2023 if the last reported sale price of the Company's class A
common stock has been at least 130% of the conversion price then in effect for
at least 20 trading days (whether or not consecutive), including the trading day
immediately preceding the date on which the Company provides a notice of
redemption, during any 30 consecutive trading day period ending on, and
including, the trading day immediately preceding the date on which the Company
provides notice of redemption. The redemption price will be equal to 100% of the
principal amount of the notes to be redeemed, plus accrued and unpaid interest
to, but excluding, the redemption date.
If the Company undergoes a "fundamental change," as defined in the Indenture,
prior to maturity, subject to certain conditions, holders may require the
Company to repurchase for cash all or any portion of their notes at a
fundamental change repurchase price equal to 100% of the principal amount of the
notes to be repurchased, plus any accrued and unpaid interest to, but excluding,
the fundamental change repurchase date.
The Indenture contains customary terms and covenants, including that upon
certain events of default occurring and continuing, either the Trustee or the
holders of at least 25% in principal amount of the outstanding notes may declare
100% of the principal of, and accrued and unpaid interest, if any, on, all the
notes to be due and payable.
The foregoing description of the Indenture and the notes does not purport to be
complete and is qualified in its entirety by reference to the full text of the
Indenture (and the form of note included therein), a copy of which is filed with
this Current Report on Form 8-K as Exhibit 4.1 hereto and is hereby incorporated
herein by reference.
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Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 of this Current Report on Form 8-K under
the heading "Indenture and the Notes" is incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth under Item 1.01 of this Current Report on Form 8-K
under the heading "Convertible Note Offering" is incorporated herein by
reference.
The Company offered and sold the notes to the Initial Purchaser in reliance on
the exemption from the registration requirements provided by Section 4(a)(2) of
the Securities Act and were resold only to qualified institutional buyers
pursuant to Rule 144A of the Securities Act. The Company will settle conversions
of the notes by paying and/or delivering, as the case may be, cash, shares of
the Company's class A common stock or a combination of cash and shares of the
Company's class A common stock, at the Company's election. Neither the notes nor
the underlying shares of class A common stock have been registered under the
Securities Act and may not be offered or sold in the United States absent
registration or an applicable exemption from registration requirements. The
Company does not intend to file a shelf registration statement for the resale of
the notes or any class A common stock issuable upon conversion of the notes.
Item 8.01 Other Events.
On December 11, 2020, the Company issued a press release announcing the closing
of the notes offering. A copy of the press release is filed as Exhibit 99.1 to
this Current Report on Form 8-K and is incorporated herein by reference.
Cautionary Note Regarding Forward-Looking Statements
Statements in this Current Report on Form 8-K and the exhibits attached hereto
about future expectations, plans, and prospects, as well as any other statements
regarding matters that are not historical facts, may constitute "forward-looking
statements" within the meaning of The Private Securities Litigation Reform Act
of 1995. These statements include, but are not limited to, statements relating
to MicroStrategy's use of the net proceeds of the offering. The words
"anticipate," "believe," "continue," "could," "estimate," "expect," "intend,"
"may," "plan," "potential," "predict," "project," "should," "target," "will,"
"would," and similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain these
identifying words. Actual results may differ materially from those indicated by
such forward-looking statements as a result of various important factors,
including the factors discussed in the "Risk Factors" section of MicroStrategy's
Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission
on October 27, 2020 and the risks described in other filings that MicroStrategy
may make with the Securities and Exchange Commission. Any forward-looking
statements contained in this press release speak only as of the date hereof, and
MicroStrategy specifically disclaims any obligation to update any
forward-looking statement, whether as a result of new information, future
events, or otherwise.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit
No. Description
4.1 Indenture, dated as of December 11, 2020, by and between
MicroStrategy Incorporated and U.S. Bank National Association, as
trustee.
4.2 Form of 0.750% Convertible Senior Note due 2025 (included within
Exhibit 4.1).
99.1 Press Release, dated December 11, 2020, announcing the closing of
the offering.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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