It is “highly unlikely” that market conditions will force MicroStrategy to sell its Bitcoin reserves. This conclusion was made by the experts at BitMEX Research.
MicroStrategy Bonds – When Liquidation?
— BitMEX Research (@BitMEXResearch) October 24, 2024
We look at MSTR's outstanding bonds & look at their structure. We assess the possibility MSTR could be forced to sell Bitcoin. We argue that forced liquidations are unlikely, based on the current debt structurehttps://t.co/mQK4ODuUlM
The analysts pointed out that the company’s stock price has reached a new all-time high. The notable growth (after a period of stagnation since the early 2000s) coincided with MicroStrategy’s shift to a strategy of adding Bitcoin to its balance sheet in August 2020.
Since then, the company has accumulated the largest corporate reserves in Bitcoin, totaling 252,220 BTC. The company spent around $9.9 billion to acquire the digital gold, with the current value of the assets exceeding $17 billion.
At a certain point, MicroStrategy began actively using debt capital by issuing convertible bonds to raise funds for purchasing Bitcoin.
BitMEX experts dismissed investor concerns about the potential liquidation of the company’s Bitcoin reserves to settle its obligations. With a current market capitalization of over $43 billion, MicroStrategy has no need for such steps, according to analysts. The company’s bond debt stands at about $4.25 billion.
However, they drew attention to the history of Grayscale’s Bitcoin Trust. This structure traded at a premium to the price of the underlying asset, but after its conversion to an ETF in January 2024, it experienced outflows. According to data from SoSoValue, this trend continues.
If at some point the premium in MicroStrategy’s stock price turns into a discount, liquidating the company’s Bitcoin reserves would become advantageous for shareholders. Analysts consider this scenario “highly unlikely” — for this to happen, the price of Bitcoin would need to drop to $15,000.
The board of Microsoft has suggested shareholders support the “evaluation of possible investments” in digital gold. MicroStrategy founder Michael Saylor has advised Microsoft CEO Satya Nadella on how to “earn another trillion dollars for shareholders.”
Hey @SatyaNadella, if you want to make the next trillion dollars for $MSFT shareholders, call me. pic.twitter.com/NPnVvL7Wmj
— Michael Saylor⚡️ (@saylor) October 25, 2024
It is worth noting that Saylor announced plans to transform MicroStrategy into a Bitcoin bank with a $1 trillion market cap. Some have linked these plans to his support for storing cryptocurrency in large financial institutions.
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