Publicly traded business intelligence firm MicroStrategy (NASDAQ: MSTR) said it intends to offer $400 million senior secured notes to raise funds to purchase more bitcoin even as the bitcoin it already has will likely result in a massive impairment.

In fact, the added purchase of bitcoin would seem to be a doubling down of sorts, for even as company expressed its intention to buy more of the leading cryptocurrency, it warned that based on the fluctuations of the price of bitcoin during the Q2 to the present date, it sees taking an impairment of at least $284.5 million for the quarter ending June 30.

Mark Palmer, a BTIG fintech analyst who covers MSTR, noted that the impairment that MicroStrategy is forced to report on its bitcoin holdings is based on the lowest price of bitcoin within the quarter. If bitcoin rebounds within that quarter, the company cannot write it back up.

While MicroStrategy has raised money to buy bitcoin from the proceeds of notes offerings before, it was always done by notes that were convertible into the company's shares. This time the notes are to be guaranteed on a senior secured basis by MicroStrategy Services Corp, a subsidiary of MicroStrategy.

Saylor has committed to not diluting existing shareholders of the two convertible bond offerings he did in December and February, said MTRS equity analyst at BTIG Mark Palmer.

It’s typical for software companies that have steady recurring revenues to be highly leveraged, in the range of 6 to 10 fold, Palmer added. 

“For MicroStrategy to flow $400 million in senior notes when it is tracking to post something in the neighborhood of $90 to $100 million of adjusted EBIDTA does not seem particularly onerous in our view,” Palmer said.

Shares of MicroStrategy, which had soared to a two-decade high in February thanks to a surging bitcoin, have plummeted almost 55% since then as they followed bitcoin back to earth.

The company said it has formed a new subsidiary, MacroStrategy LLC, which will hold its current stash of 92,079 bitcoin. It’s unclear if the company will self-custody the bitcoin, but the subsidiary will allow it to have a more “elegant organizational structure” in which it can focus on its bitcoin investments separately, Palmer said.

Nate DiCamillo contributed to reporting.

UPDATE (June 7, 15:10 UTC): Adds information about the impairment, terms of the notes offering.

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