In May, an alleged “insider” claimed that a group of Bitcoin whales attempted to liquidate a number of positions from a major player. Justin Sun, founder of Blockchain TRON, and Michael Saylor, CEO of software company MicroStrategy, were the two most common suspicious targets.
The rumor has spread as Saylor announced new BTC purchases and gave up more debt on the company to add to its BTC holdings. As recently reported, the company will use $ 1.6 billion acquired through a debt instrument to buy more Bitcoin.
With the cryptocurrency losing over 50% of its value in over a month, many are wondering what will happen if the downward trends continue, will MicroStrategy’s position be compromised?
The anonymous analyst “Degentrading” has dealt with this “Saylor Fud” and claims that the situation of the manager and his company is “not so bad”. The analyst said:
The most recent bond issue is only secured primarily on the BTC, which he intends to accumulate with the proceeds from this issue. This means – even if this 400 million bid does not support the market and liquidation occurs – the 92,079 BTC held are NOT at risk.
The analyst elaborated on MicroStrategy’s capital structure. The company has 2 outstanding bonds that mature in 2025 and 2027. The former is 0.75% and the other is none, as shown below.
Will MicroStrategy sell their Bitcoin (BTC)?
The software company pays around $ 5 million in interest on its debts annually. As the analyst found, MicroStrategy has a net profit of around 50 million US dollars per year. In theory, the company can pay its financial obligations.
This means that Saylor CANNOT be liquidated from now until at least 2025 as long as he pays the interest on the 0.75% 2025 bond.
Other users claim that Michael Saylor could be forced out of his position as CEO. The company would then be free to sell its Bitcoin in the event of a sharp decline in the crypto market. With over 90,000 BTC in their register, this would create enough selling pressure to keep pushing the price of BTC down.
However, Saylor owns 25% of the company and holds 72% of the shares with 10 times the voting rights, as the analyst stated: “Saylor cannot be forced to sell by anyone”.
“Degentrading” came to three important conclusions. First, the recent debt acquired by MicroStrategy will not affect their entire Bitcoin holdings; the company cannot be liquidated from its position. Second, the interest rate is too low to put the company at risk.
After all, because of his high voting rights, Saylor has enough control over the board to keep his post as CEO and hold their BTC.
As the following chart shows, MicroStrategy (MSTR) shares were once valued at $ 3,000 in 2000. By the end of that year, the company had lost 99.6% of its value by the time it announced its BTC purchase in 2020.
As the analyst said, Saylor has held his position for over two decades. The recent crash in Bitcoin price is just a “slip” in executive history with the market.
At the time of writing, BTC is trading at $ 36,553 with gains in the lower time frames but heavy losses on the 2 week and 30 day charts.