MicroStrategy advises on bitcoin bag dump while unloading stocks
Michael Saylor appears to be in a very tight spot as the $2.1 billion in outstanding debt that his company used to buy bitcoin is coming back to haunt him.
According to MicroStrategy’s latest first-quarter earnings report, the company says revenue from its analytics business may not be enough to pay its debt obligations. As a result, it says it may be forced to sell its bitcoin holdings or more shares.
Other options may include taking on more debt against your bitcoin as collateral. In an interview held earlier this year, Saylor claimed that if the company had problems with its debt obligations, it would prioritize selling bitcoin rather than issuing more shares in the company.
Saylor’s analytics business is also taking a hit.
- It showed one decrease of 14.4% in net operating income compared to the first quarter of last year. This amounted to a total net operating income of only 37 million dollars.
- It listed its bitcoin stack as worth around $2 billion. The company also reports a total of $3 billion in assets and $2.5 billion in debt.
- MicroStrategy currently has 140,000 bitcoins. It started its massive buying spree in late 2020 and was one of the whales whose big purchases have helped boost the price of bitcoin.
This year alone, MicroStrategy has purchased 7,500 bitcoins. The company is also the best bitcoin holder among companies and corporations.
Read more: Shades of gray and MicroStrategy battles hint at difficult times for crypto
It also has up to $112 million in Class A shares that it can still issue for sale as part of the $500 million in shares it issued last September. This year alone, MicroStrategy has sold 1,348,855 of these shares for a total of $339 million to an average of $252.85 per share.
MicroStrategy says it has enough cash to last 12 months
The company’s debt is a mixture of loans and convertible and secured certificates. The convertible bonds that mature first are those from 2025. The company paid no interest to the holders of these bonds this year.
Debt obligations include $2.4 million in coupon interest payable semi-annually on the 2025 convertible notes. It is also $15.3 million in coupon interest is due semi-annually for the 2028 Secured Notes and $0.1 million payable monthly in principal and interest on the Secured Indebtedness.
The company says it has enough money to survive the next 12 months, with a war chest of about $94 million in cash.
MicroStrategy has been one of the main mascots and champions of the bitcoin bull market and Saylor even stepped down as CEO to focus more time on bitcoin evangelism.
The prospect of the company having to sell its bitcoin to cover debt would suggest weakness in the biggest bitcoin bull and business owner. On the other hand, the prospect of MicroStrategy having to liquidate all of its bitcoin will certainly have a significant impact on bitcoin’s price.
At the time of writing, the markets were closed, but institutional investors do not appear to be particularly concerned about the report then the company’s share price remained flat.
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