Summary:
- Michael Saylorโs Microstrategy could face a margin call on its debt if Bitcoin drops below $21k
- However, the company is prepared to add funding to their existing position
- Microstrategy recently secured a loan of $205 million in late March, payable monthly beginning this month till March 2025
- Microstrategy now holds 129,218 Bitcoins with a cumulative impairment loss of $1.071 billion
The business intelligence and analytics company of Microstrategy could be set to receive a margin call on its debt if Bitcoin (BTC) drops below $21k. This is according to the companyโs CFO, Phong Le, during the companyโs most recent earnings call.
Mr. Le was responding to a question by Microstrategyโs Senior Director, Treasury and Investor Relations, Shirish Jajodia, who asked how far Bitcoin had to fall for the company to receive a margin call on its $205 million loan from Sivergate Bank. Mr. Le responded that BTC had to drop to $21k, but the company was ready to contribute more to its existing position. He said:
We took out the loan primarily so that we could continue to invest more in Bitcoin and also really to create a market for a Bitcoin-backed term loanโฆ
As far as where Bitcoin needs to fall, we took out the loan at a 25% LTV, the margin call occurs 50% LTV. So essentially, Bitcoin needs to cut in half or around $21,000 before weโd have a margin call.
That said, before it gets to 50%, we could contribute more Bitcoin to the collateral package, so it never gets there, so we donโt ever get into a situation of March call also.
Microstrategyโs $205 Million Loan Matures in March 2025
The loan in question from Silvergate bank is worth $205 million and bears interest at a โfloating rate equal to the Secured Overnight Financing Rate 30 Day Average as published by the Federal Reserve Bank of New Yorkโs website plus 3.70%, with a floor of 3.75%โ
It is also payable monthly in arrears beginning May 2022 and will mature in March 2025 unless earlier repaid per its terms.
Microstrategy Owns 129,218 Bitcoin with a Cumulative Impairment loss of $1.071 Billion
At the time of writing, Microstrategy owns 129,218 Bitcoin. According to the companyโs first-quarter financial results of 2022, the companyโs holdings of Bitcoin have a โcumulative impairment losses of $1.071 billion since acquisition and an average carrying amount per bitcoin of approximately $22,409.โ
[Feature image courtesy of Michael Saylor on Twitter]
