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(Bloomberg) — When Michael Saylor’s Strategy raised $2 billion in a convertible debt deal last week, it seemed like another triumph for firms rapidly selling equity-linked notes to fund cryptocurrency purchases. Behind the headline number, Strategy’s move to sweeten the deal’s terms sent a different signal: the market for crypto-related paper is nearing saturation.
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Strategy and its copycats have raised billions of dollars over the past four months, accounting for an ever-larger share of the broader US pool. MARA Holdings Inc. has tapped investors for nearly $2 billion while Riot Platforms Inc. and Bitdeer Technologies Group have also been active. That’s on top of Strategy’s nearly $9 billion haul.
The spike in activity means the crypto-tied market accounts for roughly 19% of US equity-linked issuance over the last 14 or so months, according to Bank of America Corp.
“That’s bigger than energy, basic materials, consumer staples — we’re getting to the point where this is a meaningful driver of performance and risk in the convertible space,” Michael Youngworth, the bank’s head of global convertibles and preferreds strategy, said in an interview.
The recent moves by Strategy, which until recently was called MicroStrategy Inc., to juice potential returns for buyers raised some eyebrows. Last week’s convertible note deal saw the conversion premium the firm had offered revised lower, and a three-year put option, while the preferred stock offering in January came with a hefty discount.
The pricing of the deals suggests “that the market is experiencing MSTR/crypto fatigue,” according to Manoj Shivdasani, founder and head of research at GSR Research, which is focused on equity-linked securities.
Since the beginning of 2024, about $17 billion has been raised via equity-linked products by firms whose business relates to digital assets or where the proceeds of the offering is earmarked to buy Bitcoin, calculations by Bank of America show. After hitting a peak in the fall, the terms of the deals have increasingly become investor friendly given the largest cryptocurrency hasn’t hit a record in a month, with issuers either offering higher coupon payments or lower conversion premiums than they had in similar recent offerings.
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