Bitcoin Mining Giant Marathon Digital Just Pulled a Michael Saylor
Bitcoin mining giant Marathon Digital just pulled a Michael Saylor. They are leveraging their companies equity to accumulate more Bitcoin.
Covered:
- Marathon Digital Leverages Bitcoin
- Michael Saylor’s Reaction
- MARA’s Plans
Marathon Digital Leverages Bitcoin Just Like Microstrategy
Marathon Digital, the largest publicly traded Bitcoin mining giant, pulled a Michael Saylor today by raising $500 million through a convertible debt offering due in 2026. The American mining company will use the proceeds to acquire more Bitcoin and Bitcoin mining hardware. Like the Saylor-led Microstrategy, Marathon also holds Bitcoin on its balance sheet.
Microstrategy famously conducted a “bonds-for-bitcoin” offering in February of 2021, and it set a major precedent at the time for public companies. Microstrategy raised a whopping $1.03 billion dollars from the offering and used every penny to acquire more Bitcoin. However, no publicly traded company conducted a “bonds-for-bitcoin” offering quite like Microstrategy. Lightly reported at the time, the offering has proved to be a monumental event for Bitcoin. Especially now, considering companies like Marathon Digital are now following in Microstrategy’s footsteps.
MicroStrategy Completes $1.05 Billion Offering of Convertible Notes at 0% Coupon and 50% Conversion Premium with #Bitcoin Use of Fundshttps://t.co/KHIyrhR8Nz
— Michael Saylor (@saylor) February 19, 2021
What investors generally receive from buying these debt notes is the ability to convert them into cash, shares of the company, or a combination of both. Buying such a debt instrument provides investors with the “downside” protection of a debt instrument and the upside potential of the equity investment in the company. Argo Blockchain did something similar this week, filing to raise $57.5 million in notes in order to buy more Bitcoin mining equipment.
Michael Saylor’s Reaction
Saylor again shocked the fixed income world in June by conducting a junk-bond offering to buy $500 million more of Bitcoin. It was the first-ever bonds “directly linked to the purchase of bitcoin.” We may be seeing an influx of companies leveraging their equity to raise funds to buy Bitcoin–a concept bulls had only dreamed of just a couple of years ago.
Naturally, Saylor tweeted out the news of the offering and gave the bullish sentiment that this decision by Marathon is “not factored in anyones model”.
A publicly traded #Bitcoin miner @MarathonDH is raising $500 million in a debt offering to acquire bitcoin and bitcoin mining machines. This is not factored into anyone's model. $MARAhttps://t.co/WauIvs4bJy
— Michael Saylor (@saylor) November 15, 2021
Interestingly, Marathon Digital (MARA) is trading down off the news, shedding 17% to $62.56 at press time. However, the losses likely stem from the news that the SEC subpoenaed Marathon seeking documents from their data facility in Montana. Even with the drop, MARA is still up nearly 500% on the year, making it one of the best performers by far.
The details of the subpoena are unclear but appear to be related to concerns over federal securities laws. Marathon said they are cooperating with the SEC. Despite the red day for Marathon, one needs to look no further than Microstrategy’s performance since their aforementioned debt offering. Despite Bitcoin’s volatility, Microstrategy (MSTR) is up 86% year-to-date.
Marathon Digital’s Plans
This strategy copied by Marathon is simply borrowing in a weak currency (fiat dollars) to purchase a strong currency (Bitcoin). Marathon will immediately sell the weak dollars raised to buy the strong Bitcoin. Moreover, Marathon can then borrow against that Bitcoin once purchased should they wish, without having to sell the Bitcoin. This is a ‘virtuous cycle’ to cycle cheap fiat at low interest to buy Bitcoin which will continue to appreciate and accrete.
Lastly, it’s crucial to understand that Fidelity, Vanguard, and Blackrock own a significant portion of Marathon, as again, it’s a publicly traded company. This means that the board of directors, etc are on board with the strategy to accumulate more Bitcoin. These behemoths are using Marathon as a proxy for Bitcoin exposure, and if this doesn’t tell you they are bullish and want to accumulate, then I don’t know what will.
The post Bitcoin Mining Giant Marathon Digital Just Pulled a Michael Saylor appeared first on CryptosRus.
Text source: CryptosRus
