MicroStrategy shares slump as bitcoin margin call looms

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MicroStrategy has pledged to never sell any of the approximately 130,000 bitcoins in its possession.

The question after the fall of the cryptocurrency over the weekend is whether a margin call will force the hand of the tech services company. Bitcoin BTCUSD,
traded below $ 25,000 after a weekend crash, partly tied to cryptocurrency provider Celsius Network that suspended withdrawals and transfers.

MicroStrategy MSTR,
shares fell 17% in pre-market trading. Looking ahead to Monday, shares fell 76% from November high.

CEO Michael Saylor, a crypto enthusiast, has led MicroStrategy to aggressively accumulate cryptocurrency. These bitcoin purchases have been made not only with the profits of your analytics software business, but also with debt through the issuance of convertible bonds, and also with your holdings in bitcoins, on a loan with Silvergate. YES,
According to a NewsBTC story last week, loans accounted for $ 2.4 billion of its $ 4 billion in bitcoin purchases.

Saylor’s love for bitcoin has not been diminished by the weekend slide.

CFO Phong Le said during the first-quarter conference call that only bitcoin purchased with its reserves was subject to a margin call. “Now the risk is really that we should contribute more bitcoins,” he said, according to a transcript compiled by FactSet Research.

“Now, as you can see, we mentioned earlier that we have a bit of bitcoin without collateral, so we have 95,643 untaxed bitcoins. So we have more that we could contribute in case we have a lot of volatility down. But again, we are talking about $ 21,000 before we get to a point where there needs to be more margin or more collateral provided, ”he added.

The rapid decline of Bitcoin means that its investment has had negative returns. At the end of the first quarter, MicroStrategy said the acquisition cost was $ 30,700 for bitcoin, net of commissions and expenses.

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