Billionaire Saylor’s MicroStrategy agrees to $205M loan to buy more Bitcoin as experts eye $50,000 price tag

Topline

MicroStrategy, the data analytics firm run by billionaire cryptocurrency bull Michael Saylor, announced on Tuesday that one of its subsidiaries took out a $205 million loan to buy more bitcoin and is using crypto- currency as collateral, again doubling its unprecedented commitment to the world’s largest. cryptocurrency as nascent market recovers.

Highlights

In a regulatory filing on Monday morning, MicroStrategy disclosed that its wholly-owned subsidiary MacroStrategy reached an agreement with specialized crypto lender Silvergate Bank on Wednesday to take out a $204.7 million loan, net of closing fees and expenses. , which he plans to use to buy bitcoin, pay borrowing fees, or for general corporate purposes.

The three-year loan was secured by approximately $820 million in bitcoin, which represents approximately 12% of MicroStrategy’s overall cryptocurrency holdings; the terms of the deal require that at least $410 million worth of bitcoins be held as collateral, assuming the principal of $205 million remains.

In a statement, Saylor said the loan gives MicroStrategy the opportunity to “more [its] position” as the public company with the largest bitcoin investment and said using the cryptocurrency as collateral on the loan, a first for the company, would allow it to continue executing its bitcoin strategy. .

The company, which started buying cryptocurrency for its balance sheet in August 2020, says it now holds around 125,051 bitcoins, bought for nearly $3.8 billion, an average price of $30,200. per piece, part of which was bought with the help of about 2.2 dollars. billion in debt incurred before last week.

MicroStrategy shares fell about 0.6% Tuesday morning and fell about 9% for the year, compared to a 5% decline for the S&P 500.

The price of bitcoin, meanwhile, climbed about 1% to $47,803 after turning positive for the year on Monday.

Ok, I added in a bullet point: crypto bank Silvergate tripled its profit to $78.5 million last year, as average deposits from digital currency customers hit a record 13, $3 billion and that its portfolio of bitcoin-backed loans reached approximately $570.5 million in commitments; Bank of America recently gave the stock a price target of $200 (implying a 50% upside), saying the bank’s “first mover advantage” bodes well given growing adoption. institutions.

Tangent

The resurgence in cryptocurrency prices has fueled a stunning turnaround in the market over the past week, as bitcoin soared nearly 25% amid positive developments such as the first options trade on bitcoin from Goldman Sachs and Blackrock’s investor note pointing out that the war in Ukraine could accelerate the adoption of digital currencies.

crucial quote

“[Bitcoin] is now approaching the important $50,000 level…Should it also breach this key price marker, we expect the current bull run to become supercharged as crypto FOMO kicks in,” said Nigel Green , CEO of wealth management advisory group DeVere, in comments via email on Tuesday.

Key context

Thanks to its growing investment in bitcoin, matched only by Tesla’s 42,000 coins, MicroStrategy has made a stunning turnaround since the dotcom bubble sent its stock price plummeting about two decades ago. Shares have soared more than 300% since the company started buying bitcoins. However, prices have also been incredibly sensitive to the outsized volatility of the nascent crypto market. Battered over the past year, the stock has tumbled 51% from a 21-year high in February 2020, when bitcoin prices recently soared after Tesla CEO Elon Musk , said on Twitter that its prices seemed “a bit high”.

Large number

$2.3 trillion. This is the value of the world’s cryptocurrencies on Tuesday after climbing more than 15% in the past week. The market peaked at over $3 trillion on Nov. 10, according to crypto data website CoinGecko.

Further reading

Billionaire Saylor’s MicroStrategy Bought $25 Million in Bitcoin During Last Month’s $500 Billion Crypto Market Crash (Forbes)

Biggest Bitcoin Backer Announces $94 Million Investment (Forbes)

This Under The Radar California Crypto Bank Just Reported Record Earnings (Forbes)

Dorothy H. Lewis