MicroStrategy Incorporated stock is indicated around 7% lower ahead of Wednesday’s open despite the software-company-come-Bitcoin-proxy's attempt to reassure investors over fears it faces a ‘margin call’ for a March US$205mln loan used to buy Bitcoin at much higher prices.
The Nasdaq-listed stock is down some 22% over the past month (72% in 2022 to date) as investors fixate on the business intelligence software firm’s holding of close to 130,000 Bitcoins, some of which were bought in March with a three-year loan via crypto-focused bank Silvergate.
Making the picture somewhat more complex from a trading risk point-of-view is the fact MicroStrategy used Bitcoins it owned as collateral to secure the loan – so as the price of Bitcoin fell, the value of the loan collateral decreased.
MicroStrategy is run by crypto uber-bull Michael Saylor – who ‘went viral’ on social media this week due to a video clip of a podcast from last year, when Bitcoin was worth around US$60,000, which showed him telling investors to re-mortgage their homes and borrow whatever they could to buy Bitcoin.
On Tuesday, meanwhile, Saylor tweeted that MicroStrategy anticipated volatility and had structured is balance sheet so that it “can remain invested”.
It followed comments earlier this month in which Saylor said the company had ‘more than enough Bitcoin’ to cover its needs for the loan, and, the price could drop below US$3,500 before more collateral was needed.
When @MicroStrategy adopted a #Bitcoin Strategy, it anticipated volatility and structured its balance sheet so that it could continue to #HODL through adversity. https://t.co/rPSUVPHUVw
— Michael Saylor⚡️ (@saylor) June 14, 2022
Nonetheless, reports this week claimed a ‘margin call’ would be triggered if Bitcoin broke beneath US$21,000 (which it did, on Tuesday).
In a fresh media report by Reuters, MicroStrategy said it hasn’t received a margin call against the loan.
In New York, the early pre-market quote for MicroStrategy sees the price down 6.9% at US$146. It comes as the price of Bitcoin fell a further 10%, down to US$20,449.