MicroStrategy Inc. MSTR is attracting hedge fund interest through its convertible notes offerings, as co-founder Michael Saylor continues his aggressive Bitcoin BTC/USD purchase strategy that has driven the company’s stock up more than 490% this year, as of Wednesday.

What Happened: Calamos Advisors LLC, among other major hedge funds, has appeared as a key player in MicroStrategy’s $6 billion convertible note issuance this year, reported Bloomberg.

These notes, created to finance the company’s growing cryptocurrency holdings, have become attractive vehicles for market-neutral arbitrage strategies.

“Convertibles are a way for issuers to monetize the volatility of their stocks, and MicroStrategy is an extreme example,” said Eli Pars, co-chief Investment Officer at Calamos Advisors, whose firm, through various strategies, holds over $130 million in MicroStrategy notes.

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Why It Matters: Saylor’s transformation of the enterprise software company has led to the accumulation of Bitcoin now valued at approximately $40 billion.

The strategy has attracted prominent hedge funds including Linden Advisors, Context Capital, Graham Capital, and Millennium Management. These firms typically employ convertible arbitrage tactics, capitalizing on MicroStrategy’s exceptional volatility – averaging 5.2% daily movements compared to the S&P 500’s 0.6%.

The timing appears favorable as Bitcoin recently crossed $100,000, driving MicroStrategy’s shares up 8.7%. However, critics like David Trainer, CEO of New Constructs LLC, warn about potential risks: “It could be a giant house of cards that will crush many shareholders when it crashes.”

Price Action: MicroStrategy last traded at $406 after an 8.72% surge on Wednesday. In after-hours trading, the stock rose an additional 1.07%, according to data from Benzinga Pro.

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