MicroStrategy has bitcoin to keep "HODLing"
Enterprise software company MicroStrategy is at risk of having to post more of its bitcoin after taking out a loan to buy more bitcoin.
Driving the news: The price of the cryptocurrency overnight briefly fell below $21,000 — a level at which the company previously said it could face a margin call. That means MicroStrategy could soon face a requirement to post more capital for its roughly $205 million bitcoin-collateralized three year term loan.
Catch up fast: CEO and co-founder Michael Saylor has become a high-profile bitcoin evangelist, raising eyebrows when he started buying bitcoin for the company's balance sheet.
- The Tysons Corner, Virginia-based company has 129,218 bitcoins, according to its most recent quarterly report, effectively making its stock a leveraged bet on the price of the digital asset going up.
- It borrowed from crypto-native Silvergate Bank, a unit of Silvergate Capital, in March to buy more bitcoin.
What they're saying: "We remain committed to our bitcoin strategy and intend to stay the course," Saylor tells Axios.
- He also pointed to his Tuesday morning tweet, saying the company "structured" the company's balance sheet to withstand "adversity."
- Alan Lane, CEO of Silvergate Bank, declined to comment on MicroStrategy. More generally, he described the digital asset industry as a "growing ecosystem," and said they have experienced this volatility before in their eight years as a lender.
Yes, but: MicroStrategy still has plenty of bitcoin to post if it needs.
- Of the bitcoin it owns, 95,643 coins remain unencumbered.
Flashback: MicroStrategy since Aug. 2020 has employed a buy-and-hold (known as "HODL" in crypto) strategy, with Saylor warning of the deleterious effects of inflation on cash or equivalent holdings.
- Since then, the company has spent nearly $4 billion to acquire bitcoin, paying an average cost of roughly $30,700.
- The company also sold convertible bonds to buy bitcoin.
Between the lines: With the price per bitcoin hovering around $22,500, MicroStrategy's strategy is clocking a paper loss at the moment.
- What's perhaps more salient to MicroStrategy shareholders is that the company will have a more difficult time acquiring bitcoins at the rate it added to its stash over the last two years, even though they can do so cheaper now.
Threat level: Saylor's enthusiasm for bitcoin also prompted the company to offer the digital asset to employees in their retirement accounts.
Our thought bubble: MicroStrategy's stock could get stuck between the stock market rout and the hard crypto crunch.
What's next: The company's next earnings call will be one to watch.