MicroStrategy prepays Silvergate loan, trims loss on BTC bet
MicroStrategy, spearheaded by one of bitcoin’s most vocal proponents, has prepaid the $205 million bitcoin-backed loan it took out from insolvent crypto-focused Silvergate Bank in March 2022.
The aggressive bitcoin investor says it paid the remaining principal on its loan at a substantial discount. In a Twitter thread, MicroStrategy co-founder and former CEO Michael Saylor explained that the company has made a final payment of $161 million at 22 percent discount.
The interest-only term loan was collateralized with about $820 million worth of bitcoin held in MacroStrategy’s collateral account and was originally set to mature in March 2025.
Silvergate announced earlier this month that that it’s winding down operations and liquidating its bank. The move came as the crypto-friendly bank became the latest casualty of a meltdown in the industry following the collapse of crypto exchange FTX, which was a major Silvergate customer.
In response, major crypto firm such as US popular exchange Coinbase and Galaxy Digital quickly ended their partnerships with the $11 billion-asset bank. However, MacroStrategy denied any exposure or ties to the failed bank, adding it was under no pressure to pay off the loan as collateral is not due until the first quarter of 2025. The firm also confirmed that the timeline wouldn’t change even in the event of Silvergate’s insolvency or bankruptcy.
Investors have been concerned that MicroStrategy would be forced to liquidate some of its bitcoin holdings if faced with a margin call.
MicroStrategy, a maker of business-intelligence software, also disclosed that it added another 6,455 bitcoins to its strategic reserves for approximately $150 million at an average price of $23,238 per coin. With its latest purchase, Microstrategy now holds 138,955 bitcoins, which were acquired at a total cost of around $4.14 billion and an average purchase price of approximately $29,817apiece.
With bitcoin currently trading at $27,160, MicroStrategy’s crypto stash would now be worth just over $3.77 billion. That translates to an unrealized loss of more than $370 million.
MicroStrategy turned to bitcoin in 2020 as a hedge against inflation. The analytics software maker, run by bitcoin bull Michael Saylor, has taken advantage of any price drop in Bitcoin to continue beefing up its investment in the world’s most-traded cryptocurrency.
This strategy, however, turned out to be a risky gamble at times when Bitcoin was moving in lockstep with other cryptocurrencies plunging amid fears of a prolonged ”crypto winter.” The question was if this slide triggers a margin call that would force Saylor’s business intelligence firm to sell part of its holdings.
