MicroStrategy takes a huge loan of $205Mn to buy more Bitcoin

MicroStrategy takes a huge loan of $205Mn to buy more Bitcoin

MacroStrategy, the recently formed subdivision of MicroStrategy, has reportedly taken a loan of around $205 million for buying more Bitcoin.

According to the firm's filing with the US Securities and Exchange Commission (SEC), the three-year loan is supported by the Bitcoin worth around $820 million, which MacroStrategy already has in its reserves and counts for only around 12% of its overall cryptocurrency holdings.

Around $410 million is required to be held as collateral. The custodian of the amount is yet unspecified but is authorized mutually by both the firm and crypto-focused Silvergate Bank.

The outstanding $205 million can be used by the company for spending.

MicroStrategy is one of the most significant corporate Bitcoin holders in the world. Till today, It has spent around $3.8 billion to buy Bitcoin. On paper, the company showcases a profit of around $2 billion at current prices.

After the disclosure, the firm's market value slipped by 0.6% before revising. Overall, the shares of MicroStrategy have observed a drop of 9% since the beginning of this year.

Sources claim that a major issue with such a loan is that if the price of Bitcoin falls sharply, then the entire firm valuation will suffer. Additionally, the firm will also struggle to pay its debt since the security and the newly bought Bitcoin would be losing value.

In August 2020, Michael Saylor's MicroStrategy volunteered into crypto investment by buying its first Bitcoin The company has gathered 125,051 Bitcoin after 2 years which, as per the current prices, value around $6 billion.

Moreover, the new funds have been aligned at a time when market experts are predicting that the prices of Bitcoin are expected to hit $50,000 sometime soon.

Source Credit - https://www.businessinsider.in/investment/news/microstrategys-subsidiary-takes-on-a-205-million-loan-to-buy-more-bitcoin/articleshow/90538962.cms