$2.4 Billion in Debt to Buy Bitcoin? MicroStrategy Has Taken On $2.4 Billion In Debt To Buy Bitcoin
MicroStrategy is battling with $2.4 Billion in debt used to buy the volatile cryptocurrency...
A questionable choice if wrong or an amazing choice if right, MicroStrategy has just purchased nearly 129,000 Bitcoins since its first purchase in August 2020. However, the company has gone nearly $2.4 Billion in debt to do so. The total purchase of Bitcoin is estimated to be totaled at $3.8 Billion based on current market prices which are down from $6 Billion in December 2021.
Kate Rooney of CNBC got a little more detail as to how the debt structure works for MicroStrategy.
“MicroStrategy can be a tough company to size up. It’s both a software firm and essentially a Bitcoin holding company and both of these businesses impact the balance sheet and the bottom line.”
Kate Rooney also stated that a lot of the Bitcoin buys have been done in the form of convertible notes. To be more exact, $1.7 Billion of the debt is in convertible notes at an interest rate between 0% and 0.75%. $500 Million worth of debt has been withdrawn in secured notes that are currently offering an interest rate of 6.1%. MicroStrategy’s most recent debt is from a $205 Million BTC-Backed loan taken in April of this year with an interest rate of 4%.
If Bitcoin falls below $21,000, MicroStrategy would be left with a potential margin call. Even with the weakness in the company’s stock, Michael Saylor has previously said the company has “enough Bitcoin to put up as collateral” should it come to that.
“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.”
Saylor said on twitter.
Bitcoin/USD is down nearly 13% in the last thirty days and is down more than 54% since November of 2021 when it was nearly trading at $69,000.