The Founder and CEO of MicroStrategy (MSTR) Michael Saylor stated that the company is not going to sell its bitcoin while trying to explain the firm’s commitments regarding its bitcoin-backed loans.
“MicroStrategy has a $205 million term loan and needs to maintain $410 million as collateral,” Saylor tweeted, linking to his company’s Q1 2022 investor presentation.
MicroStrategy owns 129,218 BTC, however 115,109 BTC remain unencumbered, and could be used as extra collateral if necessary.
This amount of bitcoin would be enough to prevent a margin call if the bitcoin price stayed over $3,562 despite the loan’s $410 million collateral demand.
Even if that level was breached, Saylor added, Microstrategy would not sell. “If the price of BTC falls below $3,562 the company could post some other collateral,” he wrote in the tweet.
In early April, Microstrategy took out a $205 million loan, its first-ever bitcoin-backed loan, to buy additional bitcoin as the price began to dip. MicroStrategy paid $190.5 million for 4167 bitcoins at an average price of $45,714 per bitcoin at the time.
The current drop in the bitcoin price has generated concerns about whether Silvergate Bank, the company’s lender, could issue a margin call shortly.
MicroStrategy’s stock dropped about 26% in tandem with bitcoin’s decline. Both are somewhat higher currently, with MSTR up 6.4% and bitcoin rebounding to $31,000.
