Long-term Debt

9 Months Ended

Sep. 30, 2024

Debt Disclosure [Abstract]

Long-term Debt

(5) Long-term Debt

The net carrying value of the Company’s outstanding debt (in thousands) consisted of the following, as of:

	September 30, 2024		December 31, 2023
2025 Convertible Notes	$	0	$	643,931
2027 Convertible Notes		1,040,339		1,037,306
2028 Convertible Notes		997,502		0
2030 Convertible Notes		784,194		0
2031 Convertible Notes		593,867		0
2032 Convertible Notes		786,754		0
2028 Secured Notes		0		491,193
Other long-term secured debt		9,802		10,161
Total	$	4,212,458	$	2,182,591
Reported as:
Current portion of long-term debt, net		509		483
Long-term debt, net		4,211,949		2,182,108
Total	$	4,212,458	$	2,182,591

Convertible Senior Notes

The Company has issued the following convertible notes (collectively, the “Convertible Notes”) in private offerings:

•$650.0 million aggregate principal amount of 0.750% Convertible Senior Notes due 2025 (the “2025 Convertible Notes”);

•$1.050 billion aggregate principal amount of 0% Convertible Senior Notes due 2027 (the “2027 Convertible Notes”);

•$1.010 billion aggregate principal amount of 0.625% Convertible Senior Notes due 2028 (the “2028 Convertible Notes”);

•$800.0 million aggregate principal amount of 0.625% Convertible Senior Notes due 2030 (the “2030 Convertible Notes”);

•$603.8 million aggregate principal amount of 0.875% Convertible Senior Notes due 2031 (the “2031 Convertible Notes”); and

•$800.0 million aggregate principal amount of 2.25% Convertible Senior Notes due 2032 (the “2032 Convertible Notes”).

The Convertible Notes are senior unsecured obligations of the Company and rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the Convertible Notes; equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.

The following table summarizes the key terms of each of the Convertible Notes (principal at inception, net proceeds, and issuance costs are each reported in thousands):

	2025 Convertible Notes			2027 Convertible Notes			2028 Convertible Notes			2030 Convertible Notes			2031 Convertible Notes			2032 Convertible Notes
Issuance Date	December 2020			February 2021			September 2024			March 2024			March 2024			June 2024
Maturity Date (1)	December 15, 2025			February 15, 2027			September 15, 2028			March 15, 2030			March 15, 2031			June 15, 2032
Principal at Inception	$	650,000		$	1,050,000		$	1,010,000		$	800,000		$	603,750		$	800,000
Stated Interest Rate (2)		0.750	%		0.000	%		0.625	%		0.625	%		0.875	%		2.250	%
Interest Payment Dates (3)	June 15 & December 15			February 15 & August 15			March 15 & September 15			March 15 & September 15			March 15 & September 15			June 15 & December 15
Net Proceeds	$	634,749		$	1,025,830		$	997,375		$	782,000		$	592,567		$	786,000
Issuance Costs (4)	$	15,251		$	24,170		$	12,625		$	18,000		$	11,183		$	14,000
Effective Interest Rate (4)		1.23	%		0.39	%		1.05	%		1.14	%		1.30	%		2.63	%
Date of Holder Put Option (5)	n/a			n/a			September 15, 2027			September 15, 2028			September 15, 2028			June 15, 2029
Initial Conversion Rate (6)		25.126			6.981			5.4589			6.677			4.297			4.894
Initial Conversion Price (7)	$	39.80		$	143.25		$	183.19		$	149.77		$	232.72		$	204.33
Convertible at any time after the following date (8) (9)	June 13, 2024			August 15, 2026			March 15, 2028			September 15, 2029			September 15, 2030			December 15, 2031
Not redeemable by the Company prior to the following date (10)	December 20, 2023			February 20, 2024			December 20, 2027			March 22, 2027			March 22, 2028			June 20, 2029
Redemption Date (11)	July 15, 2024			n/a			n/a			n/a			n/a			n/a

(1)“Maturity Date” is the stated maturity date under each applicable indenture governing such notes, unless earlier converted, redeemed, or repurchased in accordance with their terms.

(2)Holders may receive additional or special interest under specified circumstances as outlined under each applicable indenture governing the Convertible Notes.

(3)For the Convertible Notes issued in 2024, interest payments begin on (a) September 15, 2024 for each of the 2030 Convertible Notes and the 2031 Convertible Notes, (b) December 15, 2024 for the 2032 Convertible Notes, and (c) March 15, 2025 for the 2028 Convertible Notes.

(4)“Issuance Costs” reflect the customary offering expenses associated with each of the Convertible Notes. The Company accounts for these issuance costs as a reduction to the principal amount of the respective Convertible Notes and amortizes the issuance costs to interest expense from the respective debt issuance dates through the earlier of the “Maturity Date” or the “Date of Holder Put Option,” if applicable, at the “Effective Interest Rates” stated in the table.

(5)“Date of Holder Put Option” represents the respective dates upon which holders of the 2028 Convertible Notes, 2030 Convertible Notes, 2031 Convertible Notes, and 2032 Convertible Notes each have a noncontingent right to require the Company to repurchase for cash all or any portion of their respective notes at a repurchase price equal to 100% of the principal amount of such notes to be repurchased, plus any accrued and unpaid interest to, but excluding the repurchase date.

(6)The “Initial Conversion Rate” is stated in shares of the Company’s class A common stock per $1,000 principal amount. The conversion rates are subject to customary anti-dilution adjustments. In addition, following certain events that may occur prior to the respective maturity dates or if the Company delivers a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its respective Convertible Notes in connection with such corporate event or notice of redemption, as the case may be, in certain circumstances as provided in each indenture governing the respective Convertible Notes.

(7)The “Initial Conversion Price” is stated in dollars per share of the Company’s class A common stock.

(8)On or after the stated dates until the close of business on the second scheduled trading day immediately preceding the respective maturity dates, holders may convert the Convertible Notes at any time. Upon conversion of the Convertible Notes, the Company will pay or deliver, as the case may be, cash, shares of the Company’s class A common stock, or a combination of cash and shares of class A common stock, at the Company’s election. For the 2025 Convertible Notes, the date presented is the date on which the Company delivered its notice of full redemption of the 2025 Convertible Notes, which resulted in the 2025 Convertible Notes being convertible at any time thereafter until 5:00 p.m., New York City time, on July 11, 2024. See below under “Conversions and Redemption of 2025 Convertible Notes” for further information.

(9)Prior to the respective dates, the Convertible Notes are convertible only under the following circumstances: (a) during any calendar quarter commencing after the calendar quarter ending on March 31, 2021 for the 2025 Convertible Notes (of which all then outstanding notes were redeemed on July 15, 2024), on June 30, 2021 for the 2027 Convertible Notes, on June 30, 2024 for the 2030 Convertible Notes and 2031 Convertible Notes, on September 30, 2024 for the 2032 Convertible Notes, or on December 31, 2024 for the 2028 Convertible Notes (and only during such calendar quarter), if the last reported sale price of the Company’s class A common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price of the respective Convertible Notes on each applicable trading day; (b) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the “trading price” (as defined under each applicable indenture governing the respective Convertible Notes) per $1,000 principal amount of the respective Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s class A common stock and the applicable conversion rate on each such trading day; (c) if the Company calls any or all of the respective Convertible Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; and (d) upon occurrence of specified corporate events as described in each applicable indenture governing the respective Convertible Notes.

(10)The Company may redeem for cash all or a portion of the Convertible Notes at its option, on or after the stated dates, if the last reported sale price of the Company’s class A common stock has been at least 130% of the conversion price of the respective Convertible Notes then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides a notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. See below “Conversions and Redemption of 2025 Convertible Notes” subsection for information regarding the Company’s notice of redemption of the 2025 Convertible Notes.

(11)“Redemption Date” is the date on which the Company redeemed all outstanding 2025 Convertible Notes. See discussion further below under “Conversions and Redemption of 2025 Convertible Notes” pertaining to redemption of the 2025 Convertible Notes.

If the Company undergoes a “fundamental change,” as defined in the respective indentures governing the Convertible Notes prior to maturity, subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their respective Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of the respective Convertible Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The respective indentures governing the Convertible Notes contain customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25% in principal amount outstanding of the respective Convertible Notes may declare 100% of the principal of, and accrued and unpaid interest, if any, on, all the respective Convertible Notes to be due and payable.

Although the Convertible Notes contain embedded conversion features, the Company accounts for the Convertible Notes in their entirety as a liability because the conversion features are indexed to the Company’s class A common stock and meet the criteria for classification in stockholders’ equity and therefore do not qualify for separate derivative accounting.

Conversions and Redemption of 2025 Convertible Notes

On June 13, 2024, the Company announced that it delivered a notice of redemption (the “Redemption Notice”) to the trustee of the 2025 Convertible Notes for redemption of all $650.0 million in aggregate principal amount of the 2025 Convertible Notes then outstanding on July 15, 2024 (the “Redemption Date”). Due to the Company’s issuance of the Redemption Notice, the 2025 Convertible Notes became convertible at the option of the holders of such notes from the delivery of the Redemption Notice until 5:00 p.m., New York City time, on July 11, 2024. The Company elected to satisfy its conversion obligation with respect to the 2025 Convertible Notes by delivering solely shares of its class A common stock, together with cash in lieu of any fractional shares. Holders of the 2025 Convertible Notes requested to convert $649.7 million in principal amount of the 2025 Convertible Notes prior to the Redemption Date. The Company settled conversion requests in respect of $504.4 million in principal amount of the 2025 Convertible Notes during the quarter ended June 30, 2024, resulting in the issuance of 12,672,400 shares of the Company’s class A common stock and payment of a nominal amount of cash in lieu of fractional shares, and settled conversion requests in respect of $145.3 million in principal amount of the 2025 Convertible Notes during July 2024, resulting in the issuance of 3,650,650 shares of the Company’s class A common stock and payment of a nominal amount of cash in lieu of fractional shares, in each case in accordance with the terms and provisions of the indenture governing the 2025 Convertible Notes. On the Redemption Date, the Company redeemed $0.3 million aggregate principal amount of 2025 Convertible Notes, constituting all of the 2025 Convertible Notes then outstanding, at an aggregate redemption price of $0.3 million in cash, equal to 100% of the principal amount of the 2025 Convertible Notes redeemed, plus accrued and unpaid interest, to but excluding the Redemption Date.

Collective Convertible Notes Disclosures

As of September 30, 2024, the maximum number of shares into which the Convertible Notes could have been potentially converted if the conversion features were triggered at the conversion rates then in effect based on the Convertible Notes then outstanding on such date was 7,330,050 shares, 5,513,489 shares, 5,341,600 shares, 2,594,314 shares, and 3,915,200 shares for the 2027 Convertible Notes, 2028 Convertible Notes, 2030 Convertible Notes, 2031 Convertible Notes, and 2032 Convertible Notes, respectively.

Other than the 2025 Convertible Notes (for which convertibility is discussed above under the “Conversions and Redemption of 2025 Convertible Notes” subsection), the Convertible Notes were not convertible at the option of the holders during the nine months ended September 30, 2024 or 2023.

Other than the Company’s redemption of the 2025 Convertible Notes, the Company had not redeemed any of the Convertible Notes as of September 30, 2024.

As of September 30, 2024, and December 31, 2023, the net carrying value of the Convertible Notes was classified as a long-term liability in the “Long-term debt, net” line item in the Company’s Consolidated Balance Sheets.

The following is a summary of the Company’s convertible debt instruments as of September 30, 2024 (in thousands):

	September 30, 2024
	Outstanding		Unamortized			Net Carrying		Fair Value
	Principal Amount		Issuance Costs			Value		Amount		Leveling
2027 Convertible Notes		1,050,000		(9,661	)		1,040,339		1,439,850	Level 2
2028 Convertible Notes		1,010,000		(12,498	)		997,502		1,219,252	Level 2
2030 Convertible Notes		800,000		(15,806	)		784,194		1,060,704	Level 2
2031 Convertible Notes		603,750		(9,883	)		593,867		629,810	Level 2
2032 Convertible Notes		800,000		(13,246	)		786,754		897,515	Level 2
Total	$	4,263,750	$	(61,094	)	$	4,202,656	$	5,247,131

The following is a summary of the Company’s convertible debt instruments as of December 31, 2023 (in thousands):

	December 31, 2023
	Outstanding		Unamortized			Net Carrying		Fair Value
	Principal Amount		Issuance Costs			Value		Amount		Leveling
2025 Convertible Notes	$	650,000	$	(6,069	)	$	643,931	$	1,074,713	Level 2
2027 Convertible Notes		1,050,000		(12,694	)		1,037,306		913,808	Level 2
Total	$	1,700,000	$	(18,763	)	$	1,681,237	$	1,988,521

The fair value of the Convertible Notes is determined using observable market data other than quoted prices, specifically the last traded price at the end of the reporting period of identical instruments in the over-the-counter market (Level 2).

For the three months ended September 30, 2024 and 2023, interest expense related to the Convertible Notes was as follows (in thousands):

	Three Months Ended September 30, 2024						Three Months Ended September 30, 2023
	Contractual		Amortization of				Contractual		Amortization of
	Interest Expense		Issuance Costs		Total		Interest Expense		Issuance Costs		Total
2025 Convertible Notes	$	23	$	15	$	38	$	1,218	$	762	$	1,980
2027 Convertible Notes		0		1,012		1,012		0		1,008		1,008
2028 Convertible Notes		193		127		320		0		0		0
2030 Convertible Notes		1,250		974		2,224		0		0		0
2031 Convertible Notes		1,321		608		1,929		0		0		0
2032 Convertible Notes		4,500		659		5,159		0		0		0
Total	$	7,287	$	3,395	$	10,682	$	1,218	$	1,770	$	2,988

For the nine months ended September 30, 2024 and 2023, interest expense related to the Convertible Notes was as follows (in thousands):

	Nine Months Ended September 30, 2024						Nine Months Ended September 30, 2023
	Contractual		Amortization of				Contractual		Amortization of
	Interest Expense		Issuance Costs		Total		Interest Expense		Issuance Costs		Total
2025 Convertible Notes	$	2,371	$	1,494	$	3,865	$	3,656	$	2,279	$	5,935
2027 Convertible Notes		0		3,033		3,033		0		3,021		3,021
2028 Convertible Notes		193		127		320		0		0		0
2030 Convertible Notes		2,819		2,194		5,013		0		0		0
2031 Convertible Notes		2,833		1,300		4,133		0		0		0
2032 Convertible Notes		5,150		754		5,904		0		0		0
Total	$	13,366	$	8,902	$	22,268	$	3,656	$	5,300	$	8,956

For the nine months ended September 30, 2024 and 2023, the Company paid $7.6 million and $2.4 million, respectively, in interest related to the Convertible Notes. The Company has not paid any additional interest or special interest related to the Convertible Notes to date.

Senior Secured Notes

On June 14, 2021, the Company issued $500.0 million aggregate principal amount of 2028 Secured Notes in a private offering. The 2028 Secured Notes bore interest at a fixed rate of 6.125% per annum, payable semiannually in arrears on June 15 and December 15 of each year, beginning on December 15, 2021. The terms of the 2028 Secured Notes are discussed more fully in Note 8, Long-term Debt, to the Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The Company redeemed all of the 2028 Secured Notes on September 26, 2024 at a redemption price equal to 103.063% of the principal amount of the 2028 Secured Notes, plus accrued and unpaid interest to, but excluding, September 26, 2024 (the “Redemption Price”).

The Redemption Price consisted of a $515.3 million payment to redeem the full $500.0 million outstanding principal amount of the 2028 Secured Notes as of September 26, 2024 and an $8.6 million payment for accrued unpaid interest on the 2028 Secured Notes to but excluding September 26, 2024. The Company also incurred $0.1 million in third party fees in connection with the redemption of the 2028 Secured Notes. The net carrying value of the 2028 Secured Notes as of September 26, 2024, immediately prior to their redemption, was $492.5 million, which resulted in a $22.9 million loss on debt extinguishment recognized in the Company’s Consolidated Statement of Operations in the third quarter of 2024.

As of December 31, 2023, the net carrying value of the 2028 Secured Notes was classified as a long-term liability in the “Long-term debt, net” line item in the Company’s Consolidated Balance Sheet.

The following is a summary of the 2028 Secured Notes as of December 31, 2023 (in thousands):

	December 31, 2023
	Outstanding		Unamortized			Net Carrying		Fair Value
	Principal Amount		Issuance Costs			Value		Amount		Leveling
2028 Secured Notes	$	500,000	$	(8,807	)	$	491,193	$	485,070	Level 2

The fair value of the 2028 Secured Notes was determined using observable market data other than quoted prices, specifically the last traded price at the end of the reporting period of identical instruments in the over-the-counter market (Level 2).

For the three months ended September 30, 2024 and 2023, interest expense related to the 2028 Secured Notes was as follows (in thousands):

	Three Months Ended September 30, 2024						Three Months Ended September 30, 2023
	Contractual		Amortization of				Contractual		Amortization of
	Interest Expense		Issuance Costs		Total		Interest Expense		Issuance Costs		Total
2028 Secured Notes	$	7,315	$	423	$	7,738	$	7,657	$	415	$	8,072

For the nine months ended September 30, 2024 and 2023, interest expense related to the 2028 Secured Notes was as follows (in thousands):

	Nine Months Ended September 30, 2024						Nine Months Ended September 30, 2023
	Contractual		Amortization of				Contractual		Amortization of
	Interest Expense		Issuance Costs		Total		Interest Expense		Issuance Costs		Total
2028 Secured Notes	$	22,628	$	1,287	$	23,915	$	22,969	$	1,224	$	24,193

For the nine months ended September 30, 2024 and 2023, the Company paid $23.9 million and $15.3 million, respectively, in interest related to the 2028 Secured Notes.

Secured Term Loan

On March 23, 2022, MacroStrategy entered into a Credit and Security Agreement (the “Credit and Security Agreement”) with Silvergate pursuant to which Silvergate issued the $205.0 million 2025 Secured Term Loan to MacroStrategy. The terms of the 2025 Secured Term Loan are discussed more fully in Note 8, Long-term Debt, to the Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. On March 24, 2023, MacroStrategy and Silvergate entered into a Prepayment, Waiver and Payoff to Credit and Security Agreement, pursuant to which MacroStrategy voluntarily prepaid Silvergate approximately $161.0 million (the “Payoff Amount”), in full repayment, satisfaction, and discharge of the 2025 Secured Term Loan and all other obligations under the Credit and Security Agreement. Upon Silvergate’s receipt of the Payoff Amount on March 24, 2023, the Credit and Security Agreement was terminated and Silvergate released its security interest in all of MacroStrategy’s assets collateralizing the 2025 Secured Term Loan, including the bitcoin that was serving as collateral.

The Payoff Amount consisted of a $159.9 million payment to repay the full $205.0 million outstanding principal amount of the 2025 Secured Term Loan as of March 24, 2023 and a $1.1 million payment for accrued unpaid interest on the 2025 Secured Term Loan as of March 24, 2023. The Company also incurred $0.1 million in third party fees in connection with the repayment of the 2025 Secured Term Loan. The net carrying value of the 2025 Secured Term Loan as of March 24, 2023, immediately prior to the loan’s repayment, was $204.7 million, which resulted in a $44.7 million gain on debt extinguishment recognized in the Company’s Consolidated Statement of Operations in the first quarter of 2023.

No interest expense related to the 2025 Secured Term Loan was recognized after the debt was repaid in full during the first quarter of 2023. For the nine months ended September 30, 2023, interest expense related to the 2025 Secured Term Loan was as follows (in thousands):

	Nine Months Ended September 30, 2023
	Contractual		Amortization of
	Interest Expense		Issuance Costs		Total
2025 Secured Term Loan	$	3,781	$	31	$	3,812

The Company paid a final $5.1 million in interest related to the 2025 Secured Term Loan during the first quarter of 2023, $1.1 million of which was included in the Payoff Amount.

Other long-term secured debt

In June 2022, the Company, through a wholly-owned subsidiary, entered into a secured term loan agreement in the amount of $11.1 million, bearing interest at an annual rate of 5.2%, and maturing in June 2027. The loan is secured by certain non-bitcoin assets of the Company that are not otherwise serving as collateral for any of the Company’s other indebtedness. After monthly payments made under the terms of the agreement, the loan had a net carrying value of $9.8 million and $10.2 million as of September 30, 2024 and December 31, 2023, respectively, and an outstanding principal balance of $9.9 million and $10.3 million as of September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024 and December 31, 2023, $0.5 million and $0.5 million of the respective net carrying values were short-term and were presented in “Current portion of long-term debt, net” in the Consolidated Balance Sheets.

Maturities

The following table shows the maturities of the Company’s debt instruments as of September 30, 2024 (in thousands). The principal payments related to the 2028 Convertible Notes are included in the table below as if the holders exercised their right to require the Company to repurchase all of the 2028 Convertible Notes on September 15, 2027. The principal payments related to the 2030 Convertible Notes and 2031 Convertible Notes, respectively, are included in the table below as if the holders exercised their right to require the Company to repurchase all of the 2030 Convertible Notes and 2031 Convertible Notes on September 15, 2028. The principal payments related to the 2032 Convertible Notes are included in the table below as if the holders exercised their right to require the Company to repurchase all of the 2032 Convertible Notes on June 15, 2029.

Payments due by period ended September 30,	2027 Convertible Notes		2028 Convertible Notes		2030 Convertible Notes		2031 Convertible Notes		2032 Convertible Notes		Other long-term secured debt		Total
2025	$	0	$	0	$	0	$	0	$	0	$	562	$	562
2026		0		0		0		0		0		592		592
2027		1,050,000		1,010,000		0		0		0		8,787		2,068,787
2028		0		0		800,000		603,750		0		0		1,403,750
2029		0		0		0		0		800,000		0		800,000
Thereafter		0		0		0		0		0		0		0
Total	$	1,050,000	$	1,010,000	$	800,000	$	603,750	$	800,000	$	9,941	$	4,273,691