[OptionInvestor] Microstrategy Receives Cash Infusion

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From: Linda (joelinda1@home.com)
Date: Mon Jun 19 2000 - 20:16:40 PDT


In The News, Monday, 06/19/2000
Microstrategy Receives Cash Infusion
By Matt Paolucci

Shares of Vienna, Virginia-based MicroStrategy Inc. (MSTR), a maker of
highly-complex decision support software, rallied on Monday after the company
announced it had secured much-needed financing.

The company said it arranged a $125 million private placement of preferred
stock with a group of institutional investors, led by Promethean Asset Management
LLC of New York, Citadel Investment Group of Chicago and Angelo Gordon & Co. of
New York.

By the time the closing bell rang on Monday, shares of NASDAQ- traded MSTR were
up $3.875 at $42.4375, though well below its March high of $333.00.

Today's announcement, made at the Company's annual shareholders meeting, was also
a boost for the credibility of the software maker.

"Technology and management," said John Floegel of Promethean, when asked why his
company decided to invest during MicroStrategy's tough times, "a terrific
technology and a hard-driving visionary management."

"When we did the deal, it was the best for our stockholders as opposed to the
alternative," added MicroStrategy CEO and Chairman Michael Saylor.

Under the agreement, investors will receive shares of preferred stock that can
be converted into common stock two years after the closing date of June 18.

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.

"After reviewing our options, we felt that this financing offered us an excellent
opportunity to advance our business," said Mark S. Lynch, chief financial officer
of MicroStrategy Incorporated. "It will allow us to continue to grow our business
and promote our core brands, MicroStrategy® and Strategy.com. 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."

MicroStrategy stock plummeted back on March 20, losing more than 60 percent of its
value in one day, after announcing it would have to restate its reported revenues
downward for fiscal 1998 and 1999, reversing profits it reported into losses for
those two years. It later announced that it would have to restate some 1997
bookings as well.

The Company was forced to adjust its results "to conform to the most recent
statements of the Securities and Exchange Commission and the accounting profession
regarding revenue recognition in the software industry." The company said it was
adopting contract accounting for its software sales that include service
relationships. Contract accounting spreads the recognition of revenues over the
entire contract period as opposed to separating it between the software and services

MSTR said it would use the proceeds for working capital and other general corporate
purposes, primarily for supporting the introduction of its new MicroStrategy 7
software platform.

Looking at options on MSTR, the July 50 calls traded more than 1,200 contracts,
while the July 45 calls traded 503 contracts. On the put side, active issues included
the July 35 and 40 contracts.


[Also, an excerpt from


<<Earlier in the day, during the company's annual stockholders meeting in
Herndon, Va., Saylor explained to investors that no matter how good the
product is, without cash backing any company could be "crushed financially.">>

Looks like they really were desperate for cash...


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