Since adding bitcoin to its balance sheet for the first time in August 2020, MicroStrategy (MSTR) has purchased over 129,000 bitcoins.
The company, which was co-founded by CEO Michael Saylor in 1989, bought the cryptocurrency for the first time by converting $250 million in cash into 21,454 BTC. Since then, it has moved profits from its software firm into Bitcoin, buying the dip to more than triple its holdings in the last two years.
The debt structure of MicroStrategy
According to Kate Rooney of CNBC, the purchases came with a $2.4 billion debt.
“Sizing up MicroStrategy can be difficult,” Rooney said on Monday. “It’s a software company that also happens to be a Bitcoin holding company, and both of these businesses have an impact on the balance sheet and the bottom line.”
She pointed out that the majority of BTC purchases have been in the form of convertible notes, with investors receiving business stock upon maturity.
The senior convertible notes, which have an interest rate of 0% to 0.75 percent, account for $1.7 billion of the debt. In addition, the company has taken on $500 million in debt in the form of senior secured notes with a 6.1 percent interest rate. The most recent debt is a “first-of-its-kind” $205 million bitcoin-backed loan, which was taken out in April at a rate of around 4%.
After the last buy, MicroStrategy was left with the possibility of a margin call if the price of Bitcoin fell below $21,000. Despite the firm’s stock’s downturn, Michael Saylor has previously stated that the company has “enough Bitcoin to put up as collateral” if the situation arises.
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. #HODLhttps://t.co/9WHsIB6Usx
— Michael Saylor⚡️ (@saylor) May 10, 2022
