In a recent interview, Anthony Pompliano, founder and CEO of Professional Capital Management, analyzed MicroStrategy's approach to buying Bitcoin using convertible bonds. The company has been selling future equity at a 55% premium to increase its holdings in Bitcoin, which is an attractive proposition from a financial perspective.
By selling equity at a price higher than its current stock value, MicroStrategy is able to generate a large amount of capital to buy Bitcoin. Pompliano stressed that this approach is mathematically sound, but he warned investors to pay attention to often overlooked risks, as there are many unknown factors that may affect the results of the Bitcoin strategy.
In a recent report, IntoTheBlock highlighted four major risks that MicroStrategy's aggressive Bitcoin acquisition strategy poses to the cryptocurrency market. Although the probability of these risks is low, Pompliano stressed that investors must consider the most extreme scenarios. (CoinGape)