On December 5th, COINOTAG reported that Eli Pars, Co-CIO at Calamos Advisors LLC, notably participated in the acquisition of over $6 billion in convertible notes issued by MicroStrategy this year. These funds have been strategically allocated to bolster MicroStrategy’s Bitcoin reserves. Similar to various fund managers, Pars leveraged these notes for market-neutral arbitrage, capitalizing on the inherent price volatility of Bitcoin. “Convertible bonds allow issuers to harness stock volatility, with MicroStrategy exemplifying this dynamic,” he explained, as Calamos maintains over $130 million in these instruments, utilizing both long and arbitrage strategies.
Since October 31st, MicroStrategy has amassed roughly $13.5 billion in Bitcoin and issued $3 billion in zero-coupon convertible notes—a reflection of their fifth debt issuance this year. Currently, the outstanding amount of these low-interest long-term notes surpasses $7 billion, which could convert into equity if stock prices exceed predefined thresholds. Hedge funds are actively acquiring these notes to implement their own convertible arbitrage strategies, mirroring tactics already employed by firms like AQR Capital Management and Man Group.
This innovative transaction is highly appealing, as the implied volatility of convertible bonds remains significantly lower than the actual volatility, creating a unique investment landscape. MicroStrategy stands out in the convertible bond market, presenting a very rare opportunity given the scale and volume of their issuances. As stated by Michael Saylor, founder of MicroStrategy, their objective is to bridge the gap between traditional capital markets and the crypto economy, utilizing Bitcoin as a pivotal instrument in this endeavor.
Source: https://en.coinotag.com/breakingnews/microstrategy-expands-bitcoin-reserves-inside-the-6-billion-convertible-note-strategy/