MicroStrategy Stock Drops 25% As Bitcoin Plunges

Shares of

MicroStrategy Inc.

MSTR -25.18%

fell on Monday as investors worried about what a brutal sell-off in crypto would mean for the software company’s finances.

Shares fell $51.21, or 25%, to $152.15 and have lost more than 70% of their value this year.

MicroStrategy, a maker of enterprise intelligence software, switched to bitcoin two years ago as a hedge against inflation. The company has repeatedly added to its position and in March borrowed $205 million from

Silvergate Capital Of Corp.

SI -16.69%

Silvergate Bank to buy more digital assets. The company said in May it would face a margin call on that debt if the bitcoin price fell to around $21,000.

The crypto roadmap took a deep dive over the weekend with bitcoin falling to $22,611 on Monday afternoon. The sell-off also made the terms of MicroStrategy’s debt deal the focus for investors, some of whom flocked to the company’s stock following the August 2020 announcement to apply. Bitcoin as the “main treasury reserve asset”.

“We don’t expect to receive a margin call and the company has plenty of additional collateral if we need to post more,” Michael Saylor, founder and chief executive officer of MicroStrategy, wrote on Thursday. Two in one email to The Wall Street Journal.

The company said MicroStrategy’s bitcoin holdings were worth $5.9 billion at the end of March. At the time, it held 129,218 bitcoins.

Earlier on Monday, Mr. Saylor tweeted, “In Bitcoin we believe,” to his 2.5 million followers.

A spokesperson for Silvergate declined to comment.

On a May 8 conference call with analysts, MicroStrategy’s Phong Le said that bitcoin will have to halve, to around $21,000, before the company faces a margin call. for the loan they need to add to their stake in the cryptocurrency. Mr. Le thinks that call will happen when the loan-to-value ratio of the debt rises to 50%.

“That means, before it goes to 50%, we can contribute more bitcoin to the collateral package, so it never gets there,” he said.

Write letter for Justin Baer at [email protected] and Paul Vigna at [email protected]

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Appears on June 14, 2022, print edition as ‘MicroStrategy Stock Falls, Following in Bitcoin’s footsteps.’

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