Topline
MicroStrategy, the data analytics firm helmed by staunch bitcoin bull and former billionaire Michael Saylor, disclosed its first batch of bitcoin purchases since the beginning of the cryptocurrency market’s intense sell-off over the past two months, revealing it has yet again doubled down on its commitment to the world’s largest cryptocurrency despite investor concern over its position amid the steep drop in prices.
Michael Saylor, chairman and CEO of MicroStrategy, during a panel discussion at the Bitcoin … [+]
Key Facts
In a regulatory filing on Thursday, Virginia-based MicroStrategy, which owns more bitcoin than any other corporation in the world, disclosed it purchased approximately 480 bitcoins for $10 million in cash, or $20,817 per coin, between May 3 and Tuesday.
The company, which started buying cryptocurrency for its balance sheet in August 2020, says it now holds approximately 129,699 bitcoins, purchased for nearly $4 billion, or an average price of $30,664 per coin—implying the firm’s investment has yielded a roughly 33% loss thus far.
MicroStrategy’s latest purchase comes as bitcoin struggles to recoup losses since crashing 70% from a high above $69,000 in November, with concerns over industry job cuts, potential insolvency at major crypto firms and the Federal Reserve’s economic tightening measures pushing prices to an 18-month low below $20,000 earlier this month.
MicroStrategy has previously used debt and stock sale proceeds to buy bitcoin, and in March, the company took out a $205 million loan backed by the cryptocurrency to help fund additional purchases.
Bitcoin’s latest selloff prompted speculation earlier this month that MicroStrategy would be forced to liquidate some of its bitcoin holdings if the value of its loan collateral falls below the necessary limit, but Saylor dismissed the concerns as “much ado about nothing” on CNBC, claiming the price of bitcoin would need to fall below $3,500 before additional collateral would be required.
Shares of MicroStrategy, which at one point skyrocketed 800% to $1,030 during the pandemic, have plunged 79% since bitcoin’s high in November, and fell another 6% Wednesday morning to $175.
Surprising Fact
Bitcoin, which was trading at about $20,090 Wednesday morning, is down 1% in the past 24 hours and nearly 32% over the past month, but it’s still up a staggering 115% over the past two years.
Contra
“We feel like we have a fortress balance sheet,” Saylor said on CNBC’s Squawk Box earlier this month. “We’re comfortable and the margin load is well managed.”
Key Background
MicroStrategy shares collapsed nearly 40% this month as media reports and social media went “abuzz” over a potential margin call, BTIG analyst Mark Palmer explained in a recent note to clients. “The matter has been blown out of proportion,” he argued, saying the company holds nearly 100,000 bitcoins—worth about $2 billion—that are available to post as additional collateral to help avoid a margin call. Still, others remain bearish on the strategy. “If they don’t improve the core operations of the software business, they can’t keep buying more bitcoin,” Jefferies analyst Brent Thill told investors in a note this month, pointing out that the company’s software business has lost market share to giants like Microsoft as its bitcoin investment loses value. “You have an investment strategy in bitcoin that’s clearly not working for the company financially.”
Tangent
Boosted by government stimulus efforts and institutional adoption, the cryptocurrency market briefly eclipsed a record high market value of $3 trillion last year, but growing bearishness has pushed the value down below $900 billion this month, roughly halving since early May. In the latest sign of turmoil for the nascent market, Singapore-based digital asset hedge fund Three Arrows Capital (3AC), which at one point claimed to have more than $18 billion in assets, has become insolvent—prompting a British Virgin Islands court to order its assets to be liquidated, Sky News reported Wednesday. On Monday, crypto broker Voyager Digital said it issued a notice of default to 3AC as it failed to make payments on an approximately $675 million loan.
Further Reading
Amid Crypto Plunge, Longtime Bitcoin Bull Michael Saylor Falls From Billionaire Ranks (Forbes)
