MicroStrategy, the top institutional Bitcoin holder, has always exemplified a daring commitment to the digital currency, driven by the adamant trust of its co-founder and chairperson, Michael Saylor. This robust strategy may now be at risk due to a recent SEC filing that suggests a potential forced sell-off of the company’s Bitcoin assets in light of its financial difficulties and the latest plummet in Bitcoin prices. This could send shockwaves through not only the company’s financial health but also the wider Bitcoin market.
Amidst Rising Debt, Dwindling Cash Flow, and Bitcoin as a Lifeline
In a recent Form 8-K filed with the SEC, MicroStrategy revealed serious financial risks. As of the filing date, the firm maintained a Bitcoin treasury of 528,185 BTC, bought at an average price of $67,458 per Bitcoin, amounting to a total investment of roughly $35.63 billion. Yet, despite the colossal size of its Bitcoin treasury, the company conceded that its primary business of enterprise software has not been generating a positive cash flow. Additionally, the firm is saddled with a debt of $8.22 billion and an annual interest obligation of $35.1 million.
Having issued over $1.6 billion in preferred stock with hefty annual dividend responsibilities of $146.2 million, these liabilities remain unfulfilled. MicroStrategy candidly stated that it plans to rely on debt or equity financing to meet these obligations, a strategy that could be critically jeopardized if Bitcoin’s price experiences a sharp drop. The report cautions that a significant decrease in the market value of its holdings could adversely impact the company’s fundraising abilities, possibly forcing a sell-off of Bitcoin at a loss.
At the report’s filing time, BTC was merely 13% above the company’s average purchasing price. With Bitcoin making up most of MicroStrategy’s assets, its financial health is closely linked to the cryptocurrency’s price. Thus, a drop below this level could trigger a domino effect of declining stock prices and eventually necessitate selling pressure on Bitcoin itself.
Michael Saylor’s Stance: Holding the Line
As a staunch advocate of Bitcoin and a driving force behind MicroStrategy’s Bitcoin strategy, Michael Saylor responded to the news via social media platform X, tweeting the popular crypto adage: “HODL,” indicating long-term conviction. This post garnered over 1.4 million views and was well-received by many bullish investors, as evident in the comments section. He followed this up with another tweet: “Bitcoin is the Best Idea. There is no Second Best.”
At the time of this writing, BTC is trading at $81,900, a 6% rise within the last 24 hours. If MicroStrategy were to sell any Bitcoin now, it wouldn’t be the first sale of its holdings. On December 22, 2022, MicroStrategy sold 704 BTC for $11.8 million under similar circumstances.
