It is deemed “extremely unlikely” that market conditions will compel MicroStrategy to sell its bitcoin reserves, according to BitMEX Research experts.
MicroStrategy Bonds – When Liquidation?
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
— BitMEX Research (@BitMEXResearch) October 24, 2024
Analysts noted the company’s stock reaching a new all-time high. The significant growth began when MicroStrategy adopted a strategy of purchasing bitcoin for its balance sheet in August 2020, following a period of stagnation since the early 2000s.
Since then, the firm has accumulated the largest corporate reserves in bitcoin, amounting to 252,220 BTC. The company spent approximately $9.9 billion acquiring the digital gold, with current asset valuations exceeding $17 billion.
At a certain point, MicroStrategy began actively utilizing debt capital by issuing convertible bonds to raise funds for bitcoin purchases.
BitMEX experts dismissed investor concerns about the potential liquidation of the company’s crypto reserves to meet obligations. With a current market capitalization exceeding $43 billion, MicroStrategy has no need for such measures, analysts believe. The bond debt amounts to approximately $4.25 billion.
However, they pointed to the history of the Grayscale Bitcoin Trust. The structure traded at a premium to the underlying asset’s price, but after its conversion to an ETF in January 2024, it experienced an outflow of funds. According to SoSoValue, the process continues.
If at some point the premium in MicroStrategy’s stock turns into a discount, shareholders might find it advantageous to liquidate the firm’s bitcoin reserves. However, analysts consider such a scenario “extremely unlikely”—for this to occur, the cryptocurrency’s price would need to drop to $15,000.
The Microsoft board proposed that shareholders support the “evaluation of potential investments” in digital gold. MicroStrategy founder Michael Saylor reached out to the head of the software company, Satya Nadella, with advice on how to “make 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
Previously, Saylor announced his intention to transform MicroStrategy into a bitcoin bank with a capitalization of $1 trillion.
Some have linked these plans to his support for storing cryptocurrencies in large financial institutions. The businessman dismissed community concerns amid criticism.