MicroStrategy, the biggest corporate holder of bitcoin, has further added to their stack in the third quarter of 2022 while cryptos plunged to their low.
MicroStrategy reported 301 bitcoin were purchased in the three months ended September 30th, worth about $6 million, significantly down from the close to 9,000 BTC added in Q3 2021.
The company has continued to buy this year however, adding 5,609 bitcoin, compared to 43,500 BTC bought last year.
That brings their total to 130,000 BTC, bought for about $4 billion, with MicroStrategy stating they have not sold any bitcoin whatever.
Some of these bitcoins are down as collateral for the numerous loans that MicroStrategy has taken out. The company says:
“As of September 30, 2022, approximately 14,890 of the bitcoins held by the Company serve as part of the collateral for the Company’s 6.125% Senior Secured Notes due 2028 (the “2028 Secured Notes”).
As of September 30, 2022, approximately 30,051 of the bitcoins held by the Company serve as part of the collateral for a $205.0 million term loan (the “2025 Secured Term Loan”) issued to MacroStrategy LLC (“MacroStrategy”), a wholly-owned subsidiary of the Company, by Silvergate Bank (“Silvergate”).”
They also have unsecured loans, Convertible Notes, bringing the total to about $2.4 billion in debt.
Their revenue on the other hand was just $125.4 million for Q3 with gross profits at $100 million but operating expenses were at about $94 million, giving them an income of $6 million.
So $6 million a quarter to pay back $2.4 billion. Even at $100 million, it would take about four years, while with $6 million it would take more than four decades.
That is to say these loans probably won’t be paid through profits. Instead they probably will have to sell some bitcoin at some point.
They also have interest to cover. For their over-collateralized ‘loan’ – $600 million worth of bitcoin down for the $200 million ‘loan’ – they have to pay at least 3.75% (compared to the 2.7% they could have gotten for DAI/USDc on Compound) and 6.1% for the 2028 collateralized loan, a very high rate.
On the other hand bitcoin’s price only needs to double for the company to be in good profit on their bitcoin investment, but unloading may be more difficult than accumulating where it concerns such huge sums.
Tesla made their bitcoin holdings an afterthought by selling some. MicroStrategy’s fierce holding on the other hand probably has the market wondering just how long they’ll be able to withstand the pressure.
They do have some cash at hand, $60 million, down by $3 million from last year, and so they may be able to get through.
But it appears quite unlikely they’ll make any further bitcoin purchases as they appear to have consumed their credit lines, and it shouldn’t at this stage be that surprising if they sell some amounts depending on how long bitcoin sideways at these levels, which may well be some more months until probably spring or summer with yoyos on the way.
Source: https://www.trustnodes.com/2022/11/02/microstrategy-bought-300-bitcoin-in-q3