The CEO of Nasdaq-listed software company Microstrategy has dismissed rumors that his company is facing a margin call for a bitcoin-backed loan and will be forced to sell some coins. If the price of the cryptocurrency falls “below $3,562, the company may post some other collateral,” the executive explained.
Microstrategy has not received a margin call
Microstrategy CEO Michael Sayer dismissed rumors that his company is close to liquidating its bitcoin in order to meet margin calls for bitcoin-backed loans. The rumors intensified as BTC price continued to slide after the weekend selloff.
However, Sayer tweeted on Tuesday:
When Microstrategy adopted a bitcoin strategy, it anticipated volatility and structured its balance sheet so that it could continue to grapple with adversity.
Microstrategy’s Q1 2022 presentation details that the company took out a three-year term loan of $205 million from Silvergate Bank against 19,466 bitcoins.
Sayer revealed in a May 10 tweet that this loan requires Microstrategy to “maintain $410 million as collateral”.
Microstrategy currently holds 115,109 BTC. Furthermore, its subsidiary, MacroStrategy, holds 14,109 BTC, bringing its conglomerate total to 129,218 BTC.
Rumors began to spread when microstrategy chairman Fong Le said in May that it would trigger a “margin call” if the bitcoin price dips below around $21K. Typically, a margin call can be fulfilled by the company to provide more capital or to liquidate the collateral of the loan.
This week bitcoin price fell below the $21K level. However, Microstrategy told Reuters on Tuesday that it had not received a margin call, emphasizing:
We can always contribute additional bitcoins to maintain the required debt-to-value ratio.
Furthermore, Sayler explained that 115,109 bitcoins on Microstrategy could cover $410 million in collateral up to a BTC value of $3,562. However, if the price of crypto drops even further, MicroStrategy has other assets it could post as collateral, the executive detailed, detailed:
Microstrategy has 115,109 BTC that it can pledge. If BTC price drops below $3,562, the company may post some more collateral.
What do you think about the Microstrategy margin call rumor? Let us know in the comments section below.
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