Michael Saylor assuages investors after market slumps hurts MSTR, BTC

Published at: May 10, 2022

MicroStrategy’s CEO and Bitcoin proponent Michael Saylor is confident his firm’s BTC holdings will more than cover a potential margin call on Bitcoin-backed loans.

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’s decision to convert its treasury reserve into BTC holdings.

Global markets have suffered major losses in early May and Microstrategy’s stock has not been spared. MSTR has seen its value drop by 24% and the value of Bitcoin has also slumped considerably along with the wider cryptocurrency markets.

This is cause for concern as the company’s subsidiary MacroStrategy took out a $205 million loan from Silvergate Bank in March 2022, with a portion of MicroStrategy’s Bitcoin used as collateral against the debt. MicroStrategy then used the proceeds to continue the firm’s BTC acquisition strategy.

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’s earnings call in May — with the company’s CFO Phone Le confirming that it would have to sell some Bitcoin if the price of BTC fell below $21,000.

MicroStrategy has a $205M term loan and needs to maintain $410M as collateral. $MSTR has 115,109 BTC that it can pledge. If the price of #BTC falls below $3,562 the company could post some other collateral. See slides 11-12 in Q1 2022 presentation. #HODLhttps://t.co/9WHsIB6Usx

— Michael Saylor⚡️ (@saylor) May 10, 2022

Saylor took to Twitter on May 10 to assuage investors of the company’s ability to cover its debt, with MacroStrategy’s $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.

In August 2021, the company made waves 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.

At the time, Saylor indicated that the investment was driven by the company’s belief that Bitcoin is "a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash."

Perhaps more emphatic was Saylor’s 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.

MicroStrategy made another significant acquisition 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 from there — which even saw CitiBank take the decision to downgrade MicroStrategy’s stock from "neutral" to "sell" off the back of its decision to make Bitcoin its primary treasury reserve asset.