Michael Saylor looks to be in a very tight spot as the $2.1 billion outstanding debt his company used to buy bitcoin is coming back to haunt him.
According to MicroStrategy’s latest Q1 earnings release, the company says that its revenues from its analytics business may not be enough to pay its debt obligations. As a result, it says it may be forced to sell its bitcoin holdings or more shares.
Other options may include taking on more debt against its bitcoin as collateral. In an interview held earlier this year, Saylor claimed that if the company had problems with its debt obligations, it would prioritize selling bitcoin over issuing more company stock.
Saylor’s analytical business is also taking a hit.
- It showed a decrease of 14.4% in net operating revenues compared to the first quarter of last year. This amounted to a total net operating income of just $37 million.
- It registered its bitcoin stack as being worth around $2 billion. The company also reports a total of $3 billion in assets and $2.5 billion in liabilities.
- MicroStrategy currently holds 140,000 bitcoins. It started its massive buying spree in late 2020 and was one of the whales whose large purchases have helped boost bitcoin’s price.
This year alone MicroStrategy has bought 7,500 bitcoins. The company is also the top bitcoin holder among companies and corporations.
It also has up to $112 million in Class A stock which it can still issue for sale as part of the $500 million of stock that it issued in September last year. This year alone, MicroStrategy has sold 1,348,855 of these shares for a total of $339 million at an average of $252.85 per share.
MicroStrategy says it has enough money for 12 months
The company’s debt is a mixture of loans and convertible and secured notes. The convertible notes that will mature first are those of 2025. The company didn’t pay any interest to the holders of these notes this year.
Debt obligations include $2.4 million in coupon interest due each semiannual period for the 2025 convertible notes. There’s also $15.3 million in coupon interest due each semiannual period for the 2028 secured notes and $0.1 million due monthly in principal and interest to its secured debt.
The company says it has enough cash to survive the next 12 months, with a war chest of around $94 million in cash.
MicroStrategy has been one of the most important mascots and champions of the bitcoin bull market and Saylor even resigned as company CEO to focus more time on bitcoin evangelism.
The prospect of the company having to sell its bitcoin to cover its debt would hint at a weakness in the biggest bitcoin bull and corporate holder. On the other hand, the prospect of MicroStrategy having to liquidate all its bitcoin would surely have a significant impact on bitcoin’s price.
At the time of writing, markets were closed but institutional investors don’t seem to be particularly worried by the report as the company’s share price remained flat.