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MicroStrategy plays it cool as crypto investors sweat over margin call

Finance

protos.com 14 June 2022 12:51, UTC
  
Reading time: ~2 m

MicroStrategy chief Michael Saylor says the company has enough “additional collateral” to dodge a looming margin call despite shedding a quarter of its share price following bitcoin’s latest plunge.

As reported by The Wall Street Journal (WSJ), the software giant’s shares fell 25.18% on Monday to $152.15, followed by another 3% dip on Tuesday. This comes just three months after the company borrowed $205 million to bolster its bitcoin holdings.

And just last month, MicroStrategy’s president, Phong Le, outlined the price that bitcoin, which the company has been hoarding as an inflation hedge, would need to hit to trigger a margin call on that debt — about $21,000.

Understandably, the currency eventually hitting that magic number (it touched $20,816 on Tuesday before rebounding slightly to $22,000) has made MicroStrategy investors twitchy.

However, the company’s senior figures have moved to reassure them that, despite this, a margin call isn’t on the cards.

“We don’t expect to receive a margin call, and the company has plenty of additional collateral should we need to post more,” Saylor told WSJ via email. He also tweeted to confirm his ongoing support for the world’s leading crypto.

In #Bitcoin We Trust.

— Michael Saylor⚡️ (@saylor) June 13, 2022

Read more: How Michael Saylor plans to actually use MicroStrategy’s $6B Bitcoin stash

Le has also done his bit to quell any concerns related to bitcoin’s price slide, giving a little more detail about just how the company intends to tackle it.

Back in May, he told analysts that the loan-to-value ratio would need to rise to 50% but added that before that happened, the company would simply “contribute more bitcoin to the collateral package, so it never gets there.”

MicroStrategy won’t need to sell up just yet

The recent slide puts MicroStrategy’s overall bitcoin losses at close to $1 billion, according to Bloomberg.

Saylor’s company has reportedly dropped nearly $4 billion on 130,000 bitcoins in the past two years at an average purchase price of more than $30,700.

The currency’s current price puts MicroStrategy’s holdings at somewhere in the region of $3 billion — an eye-watering loss.

However, it’s not thought to be time for the company to start selling up just yet.

Global finance services company BTIG told Reuters: “We see no circumstance in which MicroStrategy is going to need to sell any of its bitcoin holdings.”

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