As the Bitcoin market confronted turmoil surrounding the potential bankruptcy of Genesis Trading and Digital Currency Group (DCG), chatter stored surfacing that Michael Saylor’s and MicroStrategy’s Bitcoin bet may very well be in jeopardy if the value continues to fall.
This elephant within the room has been investigated by Will Clemente of Reflexivity Research and Sam Martin of Blockworks Research. In their report, they study the questions of whether or not MicroStrategy has a Bitcoin liquidation worth, how excessive it’s, and the way the corporate’s debt is structured.
MicroStrategy has the biggest Bitcoin holdings amongst exchange-listed firms, amounting to 130,000 BTC. In the previous, the corporate even took out new loans to develop its Bitcoin holdings.
Specifically, MicroStrategy borrowed $2.37 billion to purchase its Bitcoin at a mean worth of about $30,000 per BTC. The debt profile of Saylor’s firm might be discovered within the desk under.
Is MicroStrategy And Saylor’s Levered Bitcoin Bet At Risk?
The convertible notes incur minimal curiosity prices for MicroStrategy, in line with the analysis report, as a result of the notes have been issued at very favorable MSTR conversion charges.
In addition, conversion to inventory can’t happen till June 15, 2025, and August 15, 2026, on the earliest, until the corporate undergoes a “fundamental change.”
According to Reflexivity Research, that is the case with a NASDAQ or NYSE delisting, a merger or acquisition of MicroStrategy, or a change in majority possession of the corporate.
Since Michael Saylor owns 67.7% of the voting rights, the latter situation could be very unlikely, making the convertible notes not a serious threat.
The 2028 senior secured notes, however, are unhealthy for a number of causes, in line with the report. They embrace a excessive fastened rate of interest, tie up 11.5% of BTC holdings, and will trigger issues if the maturity date is triggered.
“However, it poses no immediate threat to MicroStrategy,” Blockworks Research stated.
For Silvergate’s $205 million secured mortgage in 2025, with about 85,000 liquid BTC, Saylor’s liquidation worth for that mortgage is reached at a Bitcoin spot worth of $3,561. Thus, this additionally doesn’t pose a direct threat. Reflexivity Research states:
While the aforementioned dangers to MicroStrategy and its BTC reserve are comparatively far out from changing into fast considerations, the larger fear lies within the firm’s skill to service the curiosity on its excellent debt.
MicroStrategy’s working outcomes from its software program enterprise present a major decline in profitability, and a possible recession might additional affect working outcomes.
In its newest 10-Q report, the corporate itself warns that it might undergo working losses in future intervals. At the identical time, Saylor’s firm holds almost $67 million in liquid belongings, which can function a buffer over the subsequent 6-12 months.
In addition, the corporate has about 85,000 liquid BTC on its steadiness sheet to prime up collateral ought to Bitcoin fall under $13.5,000 and push the loan-to-value ratio of the Silvergate mortgage above 50%.
“However, the software business needs to pick up in order to avoid forced BTC selling in 2024,” Blockworks Research concluded. For now, nevertheless, MicroStrategy’s Bitcoin guess is nothing buyers needs to be worrying about.
At press time, the BTC worth was rejected as soon as once more from the foremost resistance at $16.600.
