Convertible Bond Investors Are Natural Shorts

MSTR drop today is the result of Convertible Debt holders shorting to delta neutral. Grok— Buyers of MicroStrategy (MSTR) convertible debt often use **convertible arbitrage**, buying the debt and shorting the stock to hedge risk. The offering was announced February 18, 2025 (yesterday, as today is February 19). ### How It Works Convertible debt can be converted into MSTR shares. Hedge funds buy it and short the stock to offset stock price drops, aiming to profit from volatility and interest. ### Timing 1. **Announcement (Feb 18)**: MSTR reveals the offering. Investors analyze but don’t act yet—terms aren’t final. 2. **Pricing (Feb 18-19)**: Terms are set soon after, possibly late Feb 18 or early Feb 19. Buyers subscribe via underwriters. 3. **Shorting (Post-Pricing)**: They short MSTR stock after securing debt, likely late Feb 18 or early Feb 19, based on the bond’s delta. 4. **Settlement (T+2)**: Debt settles (e.g., Feb 20), but shorting starts earlier. ### Likely Timing - **Debt Purchase**: Committed late Feb 18 or early Feb 19, settled later. - **Shorting**: Began late Feb 18 or early Feb 19, post-pricing. ### Context X posts and financial insights note shorting pressures MSTR stock post-announcement. Hedge funds act fast to lock in arbitrage. ### Conclusion Debt buying and shorting likely started between late Feb 18 and early Feb 19, tied to pricing.