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MicroStrategy\u2019s CEO and Bitcoin proponent Michael Saylor is confident his firm\u2019s BTC holdings will more than cover a potential margin call on Bitcoin-backed loans.<\/p>\n
The American business intelligence and software giant made headlines in 2021 with a number of major investments into Bitcoin. Saylor was a driving force behind MicroStrategy\u2019s decision to convert its treasury reserve into BTC holdings.<\/p>\n
Global markets have suffered major losses in early May and Microstrategy\u2019s stock has not been spared. MSTR has seen its value drop by 24%<\/a> and the value of Bitcoin has also slumped considerably along with the wider cryptocurrency markets.<\/p>\n This is cause for concern as the company\u2019s subsidiary MacroStrategy took out a $205 million loan from Silvergate Bank in March 2022<\/a>, with a portion of MicroStrategy\u2019s Bitcoin used as collateral against the debt. MicroStrategy then used the proceeds to continue the firm\u2019s BTC acquisition strategy.<\/p>\n If the price of BTC falls too low, this would trigger a margin call on the Silvergate loan due to the value of the collateralized asset dropping. It was a focal point of the company\u2019s earnings call in May<\/a> \u2014 with the company\u2019s CFO Phone Le confirming that it would have to sell some Bitcoin if the price of BTC fell below $21,000.<\/p>\n MicroStrategy has a $205M term loan and needs to maintain $410M as collateral. $MSTR<\/a> has 115,109 BTC that it can pledge. If the price of #BTC<\/a> falls below $3,562 the company could post some other collateral. See slides 11-12 in Q1 2022 presentation. #HODL<\/a>https:\/\/t.co\/9WHsIB6Usx<\/a><\/p>\n \u2014 Michael Saylor⚡️ (@saylor) May 10, 2022<\/a><\/p><\/blockquote>\n Saylor took to Twitter on May 10 to assuage investors of the company\u2019s ability to cover its debt, with MacroStrategy\u2019s $205 million loan needing $410 million of collateral. With 115,109 BTC as further collateral available to pledge to service the loan, Saylor noted that the value of Bitcoin would have to fall below $3,562 for the firm to run out of BTC to further back the loan.<\/p>\n Related:<\/strong> <\/em>MicroStrategy CEO won\u2019t sell $5B BTC stash despite crypto winter<\/em><\/a><\/p>\n In August 2021, the company made waves<\/a> for its decision to allocate a sizable portion of its capital directly into Bitcoin holdings. Its initial $250 million investment was made after it had met obligations to shareholders, giving the company 21,454 BTC for its treasury holdings.<\/p>\n At the time, Saylor indicated that the investment was driven by the company\u2019s belief that Bitcoin is “a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash.”<\/p>\n Perhaps more emphatic was Saylor\u2019s insistence that Bitcoin was a superior investment to holding fiat currency and that the company had made Bitcoin its principal holding in its treasury reserve strategy.<\/p>\n MicroStrategy made another significant acquisition<\/a> of Bitcoin in September 2020, adding another 16,796 additional Bitcoin at an aggregate purchase price of $175 million. The firm continued to acquire BTC<\/a> from there \u2014 which even saw CitiBank take the decision to downgrade<\/a> MicroStrategy\u2019s stock from “neutral” to “sell” off the back of its decision to make Bitcoin its primary treasury reserve asset.<\/p>\n<\/div>\n\n