MicroStrategy investors shouldn’t worry about potential margin calls on their Bitcoin-backed loan because the software maker has plenty of collateral to pledge if needed, CEO Michael Saylor told Bloomberg on Tuesday.
“As long as Silvergate loan remains collateralized with LTV less than 50%, there is no margin call,” Saylor wrote in an email to Bloomberg, referring to loan to collateral value-ratio. “We manage accordingly.
MicroStrategy shares rose more than 3% during Tuesday’s session after falling 25% Monday on fears of a margin call as Bitcoin plummeted.
The recent Bitcoin sell-off has brought the cryptocurrency price to $21,000. The company said in May that Bitcoin would need to fall to that price before triggering a margin call on its $205 million loan, made by a unit of silvegate bank. According to the report, MicroStrategy can contribute more to the collateral package so it never gets there.
Bitcoin traded at $22,284.76 on Tuesday, paring losses to 1%. MicroStrategy borrowed to buy Bitcoin at higher prices. He owns nearly 130,000 bitcoins on its balance sheet and bought them at an average price of $30,700 over the past 2 years.
“When @MicroStrategy adopt a #Bitcoin strategy, it anticipated volatility & structured its balance sheet to continue #HODL through adversity,” Saylor wrote in a Tuesday message to his 2.5 million Twitter followers.
Bitcoin has fallen along with stocks on broader investors worry about rising interest rates & slowing economic growth, pushing the cryptocurrency market value below $1 trillion.
MicroStrategy stock is down about 70% this year. Silvergate Bank’s parent company is Silvergate Capital. Its shares are up nearly 4% on Tuesday but are down more than 50% over the course of 2022.