MicroStrategy Secures $125M with Preferred Stock

As reported by Michael P Bruno, Washtech. Troubled data-mining software maker MicroStrategy Inc, whose stock has been surging and retreating by as much as 40 percent in the past two weeks on speculation of new financing, this morning said it closed a private placement of $125 million of convertible preferred stock with institutional investors led by Promethean Asset Management.

In a statement, MicroStrategy said it expects to use the funds primarily for working capital and other general corporate needs, including supporting the introduction of its MicroStrategy 7 software platform and further build-up of the Strategy.com Personal Intelligence Network.

"(Funds from the stock sale) will allow us to continue to grow our business and promote our core brands, MicroStrategy and Strategy.com," MicroStrategy Chief Financial Officer Mark S. Lynch said in a statement. "As we have added over 360 new employees last quarter and over 250 this quarter, we are pleased that by securing this funding we can move forward and execute on our business plan."

The preferred stock is convertible into MicroStrategy class A common stock at an initial conversion rate equal to the average of the daily volume weighted average prices of the company's Class A common stock for the 17 trading days following the closing of the deal.

The Vienna, Va.-based company, at its option, can require that the preferred stock convert into Class A common stock on the second anniversary of the closing date or may extend the term of the preferred stock for up to an additional two years.

The conversion rate may adjust, subject to certain limits and conditions, on the first anniversary of the closing and, if the company elects to extend the maturity of the preferred stock, on each subsequent anniversary. The preferred stock carries a 7 percent dividend yield, payable in cash or common stock, also at the company's option.

MicroStrategy shares jumped by as much as 40 percent in trading within the past two weeks as investors heard -- and spread -- rumors that MicroStrategy had secured financing, only to abandon the stock and push down its share price by an equal amount when the company did not confirm the new funding.

MicroStrategy is under fire from several class action lawsuits that allege the company and its top officials misconstrued MicroStrategy's finances to shareholders. The lawsuits stem from the company's revenue restatements in March.

The company retracted a planned follow-on offering then worth $1 billion last March after the its stock plunged from its mid-month high of $333 a share after the company started discussing its financial statement changes.

And last week, MicroStrategy reversed a decision that would have shut out the news media from its annual meeting, held June 20.

On Friday, MicroStrategy closed at $38.562 per share, down 75 cents or 1.91 percent.

Reported by Washtech.com, www.washtech.com.