MicroStrategy sinks as margin call fears loom

• Updated

BTC invested US firm denies margin call reports but stock is still down 35% in five days

The MicroStrategy logo and a Bitcoin                                 
MicroStrategy’s CEO Michael Saylor has dismissed margin call speculation about a BTC collateralised loan – Photo: Shutterstock
                                

MicroStrategy, the US business intelligence provider that is heavily invested in Bitcoin, has denied it has received a margin call against a $205m loan that it took out in March to fund further cryptocurrency purchases.

‘We can always contribute additional BTC’

According to Reuters, the company – which was founded by CEO Michael Saylor – issued a statement late on Tuesday. It read: “We can always contribute additional bitcoins to maintain the required loan-to-value ratio.

“Even at current prices, we continue to maintain more than sufficient additional unpledged bitcoins to meet our requirements under the loan agreement.”

To secure its loan from the cryptocurrency bank Silvergate Capital earlier this year, MicroStrategy put up 19,466 bitcoins as collateral.

When the world’s first and largest cryptocurrency plunged by more than 15% at the start of this week to its lowest level since December 2020, anxiety grew as to whether the US firm would face a margin call.

CFO’s conference call comments

Particular attention was paid to comments made by MicroStrategy CFO Phong Le on 3 May when he told investors in a conference call: “We have more that we could contribute in the case that we have a lot of downward volatility.

“But again, we’re talking about $21,000 before we get to a point where there needs to be more margin or more collateral contributors. So I think we’re in a pretty comfortable place where we are right now.”

By 12:15 BST (UTC +1), Bitcoin was trading well below the $21,000 benchmark at $20,495, according to CoinMarketCap.

Responding to speculation about a possible margin call, MicroStrategy CEO and prominent Bitcoin advocate Michael Saylor stated the company had “anticipated volatility and structured its balance sheet so that it could continue to hodl through adversity”.

During Monday’s sell-off, Saylor simply tweeted: “In Bitcoin we trust.”

At the time of writing, the 129,218 BTC holding that MicroStrategy has been accumulating since 2020 for $3.9bn stood at $2.6bn.

At close yesterday, the company’s stock had fallen by 35% in the past five days of trading to $156.87.

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