MicroStrategy CEO and Bitcoin advocate Michael Saylor is confident that his company’s BTC holdings will more than cover a potential margin call for Bitcoin-backed loans.
The American business intelligence and software giant made headlines in 2021 with a series of major investments in Bitcoin. Saylor was a driving force behind MicroStrategy’s decision to convert its treasury reserve into BTC holdings.
Global markets suffered big losses in early May and Microstrategy shares were not spared. The value of MSTR is down 24% and the value of Bitcoin has also plummeted along with the broader cryptocurrency markets.
This is of concern as the company’s subsidiary, MacroStrategy, raised a $205 million loan from Silvergate Bank in March 2022, using some of MicroStrategy’s bitcoin as collateral for the debt. MicroStrategy then used the proceeds to continue the company’s BTC acquisition strategy.
If the BTC price falls too low, it would trigger margin calls on the Silvergate loan as the value of the secured asset falls. It was a focus of the company’s earnings announcement in May — with the company’s CFO, Phone Le, confirming that if BTC’s price fell below $21,000, it would have to sell some Bitcoin.
MicroStrategy has a $205 million term loan and is required to post $410 million as collateral. $MSTR has 115,109 BTC to pawn. If the price of #BTC falls below $3,562, the company could post other collateral. See slides 11-12 in the Q1 2022 presentation. #HODLhttps://t.co/9WHsIB6Usx
— Michael Saylor⚡️ (@saylor) May 10, 2022
Saylor took to Twitter on May 10 to reassure investors of the company’s ability to pay off its debt as MacroStrategy’s $205 million loan requires $410 million in collateral. With 115,109 BTC as additional collateral available to service the loan, Saylor determined that the value of Bitcoin would have to drop below $3,562 for the company to run out of BTC to continue collateralizing the loan.
Related: MicroStrategy CEO Won’t Sell $5B BTC Stash Despite Crypto Winter
In August 2021, the company made waves for its decision to invest a significant portion of its capital directly in Bitcoin holdings. The initial $250 million investment was made after the company fulfilled its obligations to shareholders, giving the company 21,454 BTC for its own holdings.
At the time, Saylor pointed out that the investment was driven by the company’s belief that Bitcoin is “a reliable store of value and an attractive investment with more long-term upside potential than holding cash.”
Perhaps more emphatic was Saylor’s insistence that bitcoin was a superior investment to holding fiat currencies and that the company had made bitcoin its primary holding in its treasury reserve strategy.
MicroStrategy made another significant acquisition of Bitcoin in September 2020, adding another 16,796 additional Bitcoins for a total purchase price of $175 million. The Company continued to acquire BTC from there — even leading to CitiBank making the decision to downgrade MicroStrategy stock from “neutral” to “sell” after deciding to make bitcoin its primary Treasury reserve asset.
https://cointelegraph.com/news/michael-saylor-assuages-investors-after-market-slumps-hurts-mstr-btc Michael Saylor reassures investors after market slumps hurt MSTR, BTC