MicroStrategy will hold a special shareholders' meeting on 1/21, and the number of shares after the capital increase will surpass Microsoft to become the fifth largest on Nasdaq.

Self-proclaimed BTC development company MicroStrategy will hold a special shareholders' meeting on 1/21 to allow shareholders to vote on several key proposals aimed at accelerating the 21/21 plan, simplifying fund raising, and aligning director compensation with the company's BTC strategy. Once the proposals are passed, according to Bloomberg, the number of outstanding shares owned by MicroStrategy may surpass that of Microsoft, making it the fifth largest company in terms of outstanding shares in the Nasdaq 100 index.

(MicroStrategy held an extraordinary shareholders meeting, planning to increase its share capital by 22 times to ensure the implementation of its BTC strategy)

MicroStrategy proposes to increase share capital, with an increase of up to 2,200%.

MicroStrategy's common stock is divided into Class A shares and Class B shares. Class A shares have one vote per share, while Class B shares have ten votes per share. Almost all of the Class B shares are owned by its founder, Michael Saylor. Based on the current number of shares, Saylor holds 46.8% of the voting rights, which means he has absolute control.

MicroStrategy will vote at an extraordinary shareholders' meeting on 1/21 to decide whether to authorize an increase in the number of Class A common shares from 330 million to 10.3 billion. Once the proposal is approved, the number of outstanding shares owned by MicroStrategy may exceed that of Microsoft, making it the fifth largest publicly traded company in the Nasdaq 100 Index. The top four are currently NVIDIA, Apple, Alphabet (Google's parent company), and Amazon.

In January, MicroStrategy announced plans to raise up to $2 billion through the issuance of perpetual preferred stock. This will also be voted on at the shareholders' meeting to increase the statutory number of preferred shares from 5 million to 1.005 billion.

(MicroStrategy will issue an additional $2 billion in perpetual preferred stock and continue to buy BTC)

Capital increase will dilute shareholder's equity, which is actually the de-leveraging of Bitcoin.

In most cases, such potential capital increase plans will be opposed by investors because they will dilute earnings per share, shareholder equity, and voting rights.

However, as can be seen from the statistics in the figure below, MicroStrategy has issued new shares several times for capital increase, and the number of outstanding shares has increased significantly from 72.5 million shares at the beginning of 2020 to the current 223 million shares. Since implementing the BTC purchase strategy, MSTR's stock price has risen by more than 2,500%, astonishingly becoming a recent favorite on Wall Street.

RIA Advisors portfolio manager Michael Lebowitz said that while stock issuance is not uncommon, the plan of issuing a large amount of stock at once, like MicroStrategy, is unique. However, Lebowitz believes that the company's underlying software business has been incurring losses for at least the past three quarters. Even if the debt does not increase, shareholders will be negatively affected by the significant issuance of new shares.

Due to all these convertible products and debt issuances, the leverage they have is greatly reduced. One of the reasons investors like MicroStrategy is that it is a leverage game for BTC, but what they actually do is to de-leverage.

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