In May, a so-called “insider” claimed that a group of bitcoin whales were trying to liquidate a chain of positions from a major player. Justin Sun, founder of the TRON blockchain, and One of the top two suspected targets was Michael Saylor, CEO of software company MicroStrategy.
The rumors spread with Saylor announcing new BTC purchases and issuing more debt to the company to expand its BTC holdings. As recently reported, the company will use the $1.6 billion acquired via a debt instrument to purchase more bitcoin.
With the cryptocurrency losing more than 50% of its value in over a month, many are wondering what will happen if the downtrends continue, and will the MicroStrategy mode be breached?
An anonymous analyst addressed this “disrespectful” Saylor Food and claimed that the situation for the CEO and his company was “not appalling”. analyst He said:
The latest bond issuance will only be guaranteed on BTC that he plans to accumulate on the proceeds of this issuance. IE – even if this 400 million supply fails to support the market and there is a liquidation – 92,079 BTC held will not be at risk.
The analyst went more in-depth into MicroStrategy’s capital structure. The company has two outstanding bonds maturing by 2025 and 2027. One has an interest rate of 0.75% and the other has zero interest, as shown below.
Does MicroStrategy Sell Bitcoin (BTC)?
The software company must pay about $5 million annually in interest on its debt. As the analyst concluded, MicroStrategy generates about $50 million in net profit annually. In theory, a company can pay for its financial obligations.
This means that from now until at least 2025, Saylor cannot be liquidated as long as it pays interest on the 0.75% 2025 bond.
Other users claim that Michael Saylor could be forced out of his position as CEO. The company will then be free to sell its bitcoins, in the event of a significant drop in the crypto market. With more than 90,000 BTC in their vault, this will create enough selling pressure to push the price of BTC further lower.
However, Saylor owns 25% of the business and owns 72% of the stock with 10x voting power, as the analyst discovered: “Nobody can force Saylor to sell.”
The “offensive” reached three important conclusions. First, MicroStrategy’s recent debt will have no effect on its total Bitcoin holdings; The company cannot be liquidated from its position. Second, the rate of interest is too low to put the company at risk.
Finally, Saylor has enough control over the board, given his high voting power, to retain his position as CEO and hold BTC.
As the chart below shows, MicroStrategy (MSTR) shares were once valued at $3000 during the year 2000. By the end of that year, the company continued to lose 99.6% of its value until the announcement of its BTC purchase in 2020.
For more than two decades, the analyst said, Saylor has held his position. The recent crash in the price of Bitcoin is nothing but a “pass” in the CEO’s history with the market.
At the time of writing, BTC is trading at $36,553 with gains on the lower time frames, but massive losses on the 2 week and 30 day charts.