By
Chimamanda U. Martha
April 24th, 2024
Michael Saylor remains confident that MicroStrategy’s debt profile is in a good place despite external circumstances, and has attempted to allay investors.
MicroStrategy’s Michael Saylor moved to calm the nerves of company investors after shares of the cloud computing platform recently nosedived.
MicroStrategy (NASDAQ: MSTR), a mobile software and cloud-based services company with a substantial Bitcoin (BTC) investment portfolio, saw its value fall by 24%. This came amid significant losses that have impacted global markets since early May. Alongside the stock market fiasco, the crypto marketplace has also declined substantially.
Michael Saylor Reaches Out to Investors
Despite the unsavory optics, Saylor is resolute that MicroStrategy’s BTC holdings will comfortably cover a potential margin call on Bitcoin-backed loans. Taking to Twitter to share his analysis and assuage MicroStrategy investors, Saylor explained:
“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. #HODL.”
Essentially, the MicroStrategy co-founder and CEO said that the business intelligence and cloud-services company can cover its debt. In addition, Saylor is also positing that despite BTC’s dwindling price, it would have to fall below $3,562 to be unable to back MicroStrategy loans. At the moment, this probability seems like a very long shot.
Saylor’s confidence in Bitcoin comes after MicroStrategy subsidiary MacroStrategy took a $205 million loan from Silvergate Bank back in March. The company first used a portion of its holdings as collateral. After that, MicroStrategy then proceeded to buy more of the crypto using the loan proceeds.
MicroStrategy and Bitcoin
MicroStrategy’s affinity for BTC is well-documented as the company periodically acquires the digital currency in large amounts. In fact, back in 2021, the business intelligence and software company made headlines with a number of Bitcoin investments. Saylor, a long-standing BTC devotee, is also the primary reason why MicroStrategy embarked on its strategy of converting its treasury reserve into BTC holdings. At the time, the company initially outlaid $250 million after meeting shareholder obligations in return for 21,454 BTC in treasury holdings. Saylor had also stated that the crypto is “a dependable store of value,” after revealing a substantial Bitcoin portfolio. In addition, the MicroStrategy CEO also described the leading crypto as “an attractive investment asset with more long-term appreciation potential than holding cash.”
Back in September 2020, MicroStrategy also made a significant investment in Bitcoin. The Virginia-based company forked out approximately $175 million for an additional 16,796 BTC. Since then, MicroStrategy has continued to purchase Bitcoin. Currently, the company’s BTC portfolio is worth $3.5 billion.
In a shareholder letter issued in April, Saylor lauded MicroStrategy’s ‘Bitcoin experiment’ saying:
“MicroStrategy remains the largest publicly-traded corporate holder of bitcoin. MicroStrategy, together with its subsidiaries, holds 129, 218 bitcoins acquired at an aggregate purchase price of $3.97 billion and an average purchase price per bitcoin of approximately $30,700.”
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