A Look Inside MicroStrategy’s $2.4 Billion Bitcoin Purchase Loan

October 30, 2022

A Look Inside MicroStrategy's $2.4 Billion Bitcoin Purchase Loan


A Look Inside MicroStrategy’s $2.4 Billion Bitcoin Purchase Loan

With its multiple substantial purchases, software firm MicroStrategy has secured its place as a key Bitcoin player. The firm, which is worth $1 billion, placed a large amount of its own money into buying bitcoin, but the rest of the money came from loans. Convertible notes, senior secured loans, and bitcoin-backed loans account for $2.4 billion of the company’s $3.97 billion in BTC acquisitions. Convertible notes were utilized to fund a large percentage of MicroStrategy’s bitcoin holdings. When these notes reach maturity, they are converted into company stock. In a nutshell, they’re a down payment on future stock ownership in the software firm. The convertible notes, worth $1.75 billion, have an interest rate range of 0% to 0.75 percent. The vast majority of the loans MicroStrategy has taken out to purchase bitcoin. In comparison to the convertible notes, the other loans are substantially less. Senior secured loans are an example. MicroStrategy only took $500 million in senior secured loans to buy bitcoin, according to data. These, on the other hand, have a higher interest rate of 6.1 percent.

Last but not least, MicroStrategy has obtained bitcoin-backed financing. When the software business took out these loans, they were the first of their sort. The $205 million was also used to acquire more BTC at a 4 percent interest rate. According to the CFO, the Bitcoin-backed loan is subject to a possible margin call. However, this is only conceivable if the price of BTC falls drastically from its current level to around $21,000. Given present costs, this is still a long way off from becoming a problem. Nonetheless, the likelihood of this has caused investors to be concerned, and MicroStrategy’s stock price has dropped in recent weeks. BTC was purchased with $1.57 billion in revenues from the company’s operations. As previously indicated, the rest of it was financed by different sorts of loans. Despite this, the corporation has been public about its choice not to sell any of its BTC and its intention to keep it for the long term. It has 0.615 percent of the entire circulating bitcoin supply in its possession.


Read more: MicroStrategy Will Not Dump Any Of Its Bitcoin, CFO Reveals

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