The World’s Largest Corporate Bitcoin Holder Is About To Get Liquidated (According to the Internet)
If true, this could send Bitcoin back to the dark ages.
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Michael Saylor, the former CEO of MicroStrategy and a well-known figure in the Bitcoin community, has used funds from stock and bond offerings to purchase 130,000 Bitcoin, which is currently worth $2.6 billion.
Saylor is facing the possibility of a margin call on a $250 million securitised loan he took to buy Bitcoin.
A margin call is a request from a lender, brokerage, or bank for an individual to increase their equity position when the value of the asset they have borrowed declines significantly.
The individual may be required to pay money to increase their equity position or sell assets to pay the loan.
In addition, the District of Columbia is suing Saylor for allegedly conspiring to avoid $25 million in district taxes.
Saylor has faced legal issues in the past, as the U.S. Securities and Exchange Commission brought and settled accounting charges against him, MicroStrategy, and other company executives following the dot-com bubble in March 2000.
Despite the controversies, Saylor, known for his bullish views on Bitcoin, has predicted that Bitcoins market cap will eventually be worth $100 trillion.
Saylor Hit Back
In a recent interview with CNBC, Saylor addressed MicroStrategy’s borrowing and the potential impact of a continued decline in Bitcoin prices.
He stated that the company has a $200 million loan that is currently ten times over-collateralised and has cash and generated cash flow.
Saylor also downplayed the potential for a margin call, stating that it is “much to do about nothing” and that the Twitter trolls like to attack him for engagement.
He added that MicroStrategy borrowed $2.2 billion at a blended interest rate of 1.8% before the interest rate doubled and that he believes it was an excellent decision to do so at a rate of 1.5%.
Industry Experts Have Given Their Thoughts.
Mark Palmer, the Managing Director and FinTech Analyst at BTIG, conducted an analysis and reached a similar conclusion about MicroStrategy’s Bitcoin holdings.
He found that the company owns approximately 95,000 of the 130,000 Bitcoins are not subject to creditor claims.
Palmer also noted that a Bitcoin price of $21,000 should have triggered a demand for more Bitcoin pledged as collateral by MicroStrategy’s lenders.
The current price of Bitcoin as of publishing is $17,000
Palmer says it would take the price of Bitcoin to fall to $3,500 before the company might run out of Bitcoin to use as collateral and require cash reserves.
Saylor has said that if things got to that point, he would obtain further financing.
In a statement, Palmer said,
“The reality is that 95,643 of the 130,00 Bitcoins held by MicroStrategy are unencumbered and available to the company to post as additional collateral to avoid or address a margin call.”
Final Thoughts
A margin call on a loan taken out by Microstrategy’s subsidiary to purchase more Bitcoin does not necessarily mean Microstrategy will be liquidated or forced to sell its Bitcoin holdings.
It’s unlikely that Michael Saylor will face liquidation despite the potential for a margin call on his Bitcoin holdings.
This situation highlights the importance of entrepreneurial skills and the dangers of blindly believing everything you read on the internet.
Saylor, who has a 40-year track record as a successful entrepreneur, has advised those with Bitcoin to hold onto it and those without it to buy it.
If you have Bitcoin, he cautions you to be patient.