MicroStrategy Incorporated (NASDAQ: MSTR) is the biggest Bitcoin (CRYPTO: BTC) holder among U.S. companies, but the Michael Saylor-led company may have to shed some of it if the apex coin keeps on tumbling.
The Borrowing: In March 2022, MicroStrategy borrowed $205 million from Silvergate Capital Corp’s (NYSE: SI) Silvergate Bank, collateralized against its Bitcoin holdings to buy cryptocurrency and pay fees, interest, and expenses linked to the loan transaction.
MicroStrategy holds 129,218 BTC, valued at $2.76 billion, according to Bitcoin Treasuries data, making it the largest holder of the apex coin ahead of Tesla Inc (NASDAQ: TSLA).
The cost basis of MicroStrategy’s holdings is $3.965 billion, which implies the company is at an unrealized loss of almost $1.2 billion.
The Margin Call: MicroStrategy CFO Phong Le said on the company’s first-quarter earnings call in May that if Bitcoin’s price falls below $21,000, the company would face a margin call and could contribute “more Bitcoin to the collateral package'' to deter it.
Le had said that MicroStrategy has about 95,643 encumbered BTC and the company had “quite a bit of uncollateralized Bitcoin.”
Bitcoin was trading at $22,043.76 at press time, according to data from Benzinga Pro.
Saylor On Posting Collateral: Last month, Saylor said the company needs to maintain $410 million as collateral with regard to the Silvergate loan, and it has 115,109 BTC it can pledge.
“If the price of Bitcoin falls below $3,562 the company could post some other collateral,” Saylor said in May.
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
Despite the cryptocurrency downturn, there is no indication Saylor is backing away from his singular focus on Bitcoin.
An aerospace engineer by education, Saylor tweeted this month that “engineers don't diversify, they concentrate," with a Bitcoin hashtag.
Engineers don't diversify, they concentrate. #Bitcoin
— Michael Saylor (@saylor) June 5, 2022
