Strategy to Equitize Convertible Debt Over 3-6 Years: The Saylor Model

Michael Saylor, through MicroStrategy, has pioneered a unique financial engineering model that leverages convertible senior notes to accumulate Bitcoin. This strategy focuses on a 3-6 year horizon for ‘equitization,’ a process where debt is effectively transformed into company equity rather than being repaid in cash. The strategy begins with the issuance of low-interest convertible notes, often with coupons below 1%, to institutional investors. These proceeds are immediately deployed to acquire Bitcoin, increasing the firm’s digital asset holdings. The notes are structured with a conversion premium; as the price of Bitcoin rises, the company’s stock price typically tracks this appreciation. When the stock price exceeds the conversion threshold within the 3-6 year window, bondholders are incentivized to convert their debt into shares of Class A common stock. This mechanism allows the company to retire its debt obligations without depleting cash reserves, essentially funding asset acquisition through strategic equity dilution. By staggering these debt maturities, the ‘Saylor Model’ creates a continuous cycle of capital raising and asset accumulation, protected by long-term Bitcoin price appreciation.

Source: Strategy to equitize convertible debt over 3-6 years: Saylor