Finance

MicroStrategy Faces Setback in Financial Strategy with New Stock Deal

MicroStrategy Inc.'s aggressive efforts to raise capital for its Bitcoin purchases have encountered their first major hurdle.

The company, known for its Bitcoin treasury strategy, sold preferred stock units last week—uncommon, debt-like securities offering an 8% coupon. However, it had to adjust the pricing to attract buyers, selling the shares at $80 each, 20% below the advertised price. This discount boosted the yield to 10% for investors, marking a significant concession to finalize the deal.

"I can't recall seeing something priced this low," said James Dinsmore, portfolio manager at Gabelli Funds Inc. "Clearly, there was some resistance to the initial pricing."

Despite the pricing challenges, the deal’s favorable terms allowed MicroStrategy to raise $563 million—more than double its initial target—as co-founder Michael Saylor continues to explore various funding avenues to support his Bitcoin strategy. The strong demand highlights the market's interest in this asset class, with the company planning to raise up to $2 billion this quarter, even though it's more costly than previous ultra-low coupon convertible bonds or at-the-money shares.

MicroStrategy did not respond to requests for comment.

"A 10% yield isn't cheap capital, but considering the company’s profile, it's reasonable," said David Clott, portfolio manager at Wellesley Asset Management. "And they aren't diluting existing investors as much as they did with prior convertible offerings. This is a positive outcome as it opens up a new funding market."

This move is part of MicroStrategy's broader goal to secure $42 billion over three years, mixing equity and fixed-income securities. The company expects to shift more toward fixed-income this quarter. It has already raised nearly $17 billion through its share sale program, with a smaller amount raised via convertible debt. MicroStrategy now owns around $47 billion in Bitcoin, roughly 2% of all the Bitcoin that will ever be mined.

The new funding tool, known as perpetual strike preferred stock, offers a quarterly dividend and includes a cumulative feature, meaning any missed payments must eventually be made. Its conversion price is set at $1,000—approximately 200% above its latest share price—making near-term conversion to common stock unlikely and delaying dilution for existing shareholders.

TECH

Workday Cuts 1,750 Jobs as It Shifts Focus to AI Innovation

Workday, the Bay Area tech leader in payroll and human resources, announced on Wednesday that it would lay off 1,750 employees, or 8.5% of its workforce.

CEO Carl Eschenbach explained that these layoffs are part of a restructuring plan to better position the company in the evolving landscape of artificial intelligence. This marks the second round of job cuts within a year, following a 3% reduction in February 2024.

In an open letter to employees, Eschenbach called the move "necessary" to stay competitive in an increasingly AI-driven business environment, where he sees AI as a significant catalyst for future growth.

“Companies everywhere are reimagining how work is done,” Eschenbach wrote. “The growing demand for AI has the potential to usher in a new era of growth for Workday.”

While Workday did not detail which departments would be most affected, the layoffs reflect a wider trend in the tech sector, where many companies are downsizing while simultaneously increasing investments in AI.

This follows similar moves, like Salesforce’s announcement on Tuesday of laying off 1,000 workers in its San Francisco office.

For those affected, Workday is offering severance packages, including a minimum of 12 weeks’ pay in the U.S., along with career transition services and immigration support. Eschenbach also expressed his gratitude to those leaving the company.

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CRYPTO

White House Crypto Czar David Sacks Makes Stablecoin Legislation His Top Priority

David Sacks, the newly appointed White House AI and crypto czar, is working closely with lawmakers to craft regulations for digital assets, with stablecoins being a key focus.

“They are very committed to advancing legislation through the House and Senate this year to establish a clear regulatory framework that the digital assets ecosystem needs to foster innovation in the U.S.,” Sacks said during an appearance on CNBC’s “Closing Bell Over Time” on Tuesday. “Passing legislation through Congress takes time, but I believe this is something we could accomplish within the next six months.”

Earlier, Sacks participated in a press conference with leaders of the House and Senate banking and finance committees to discuss their initial goals for crypto policy, with input from the SEC. It was part of a busy day in Washington where regulators and key figures from Capitol Hill and the Trump White House outlined their next steps in digital currency policy.

“I look forward to working with each of you to create a golden age for digital assets,” Sacks stated at the event.

He was joined by Sen. Tim Scott (R-S.C.), chairman of the Senate Banking Committee, Rep. French Hill (R-Ark.), chairman of the House Financial Services Committee, and Sen. John Boozman (R-Ark.), head of the Senate Agriculture Committee.

The group emphasized that their top priority is advancing a stablecoin bill introduced by Sen. Bill Hagerty (R-Tenn.), which aims to establish clear regulations for stablecoin use. Stablecoins are a type of cryptocurrency pegged to real-world assets, such as the U.S. dollar.

While stablecoins have gained traction overseas, U.S. lawmakers are now focusing on promoting stablecoin issuance within the United States, reinforcing the dollar’s dominance in digital finance. Advocates like Sacks argue that this could lead to trillions of dollars in new demand for the dollar and potentially lower long-term interest rates.