MicroStrategy co-founder and CEO Michael Saylor is responding to fears that a part of the firm’s Bitcoin (BTC) holdings purchased using debt could be liquidated.
In a CNBC interview, Saylor says a margin call is highly unlikely given the Bitcoin position MicroStrategy acquired using debt is adequately collateralized.
“On a multi-billion dollar balance sheet, we only have got a $200 million loan that we have to collateralize. And we are 10x over-collateralized on it right now.
If the market traded down by a factor of 10, we’ve got cash and we generate cash flow.
The margin call is much ado about nothing, it’s just made me Twitter-famous. So I appreciate that. And the Twitter trolls love to beat up on me because it gets them engagement.”
In a margin call, a trader or investor is required to put up more funds to avert the closure or liquidation of a leveraged position.
The MicroStrategy CEO says most of the enterprise analytics software firm’s debt is manageable as it was taken out before interest rates were hiked.
“As for the company’s balance sheet strategy in general, we borrowed $2.2 billion at a blended interest rate of 1.8% before interest rates doubled…
If you had a chance to grab $2 billion at 1.5% interest, it seems like a reasonable thing to do and I’m glad we did it. Most of it is unsecured debt – $1.7 billion of it is unsecured. The $500 million comes due in seven years after we borrowed the money.
So we feel like we have a fortress balance sheet, we’re comfortable and the margin loan is well managed.”
Bitcoin is trading for $21,030 at time of writing. MicroStrategy holds 129,218 Bitcoin bought at an average price of approximately $30,700, translating to paper losses of about $1.25 billion.
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