What happened
Shares of MicroStrategy (MSTR +4.06%) rose on Tuesday after the software company announced plans for its hoard of cash. MicroStrategy has commenced a modified Dutch auction tender offer for its common stock, and it has bought a significant quantity of bitcoins. Shares of MicroStrategy were up about 10.3% at 12:50 p.m. EDT.
So what
MicroStrategy had over $500 million of cash and short-term investments at the end of June. The company previously announced plans to return about half of that to shareholders while investing roughly the same amount in alternative assets.
Image source: Getty Images.
On Tuesday, MicroStrategy laid out the details of its capital allocation plans. The company will buy as much as $250 million worth of its common stock via a modified Dutch auction tender offer, paying between $122 and $140 per share. The tender offer will expire on Sept. 10.
On top of the tender offer, MicroStrategy announced that it has already purchased 21,454 bitcoins for approximately $250 million, inclusive of fees and expenses. "This investment reflects our belief that Bitcoin, as the world's most widely adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash," said MicroStrategy CEO Michael Saylor in a statement.
Now what
The market was on board with MicroStrategy's plans, sending the stock surging on Tuesday. The company's Bitcoin strategy will work out fine if the value of the cryptocurrency holds its ground, but that's far from a guarantee given Bitcoin's history of wild price swings. The move will tie MicroStrategy's stock price to the price of Bitcoin to a degree, for better or worse.
Including Tuesday's move higher, shares of MicroStrategy are now down less than 5% since the start of the year.
