MicroStrategy’s Bitcoin Drama: Will They Liquidate or Just Buy More? 😂

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Ah, dear reader! Gather ’round as we delve into the curious case of Strategy, or as the stock market calls it, MSTR. Once soaring high like a kite on a windy day, it has now plummeted a staggering 55% from its lofty perch of $543 to a mere $250. One might say it’s akin to a grand feast that has turned into a rather unfortunate potluck! 🍽️

Now, this software intelligence firm, with its treasure trove of approximately 499,096 Bitcoin—worth a jaw-dropping $44 billion—has left market participants scratching their heads. Could they possibly face a forced liquidation of this digital gold? Oh, the suspense! 🎭

On a fine Tuesday, the analysts from The Kobeissi Letter took to the digital realm of X, weaving a tale of potential doom and gloom. “The MicroStrategy liquidation: As MSTR tumbles down the rabbit hole of -55%, many are pondering the dreaded ‘forced liquidation.’ Could they really be forced to sell their Bitcoin bounty? Is such a calamity even conceivable?” they mused, as if they were narrating a tragic opera. 🎶

Is A Forced Bitcoin Liquidation Possible?

According to our dear analysts, MicroStrategy’s Bitcoin hoard totals around 499,096 BTC, currently valued at $43.7 billion. With an average cost basis of $66,350 per Bitcoin, one can only imagine the sleepless nights spent worrying about what might happen if Bitcoin’s price were to nosedive below this threshold. 😱

“Let us not forget, this isn’t the first time the specter of liquidation has haunted our dear MSTR. They’ve been on a Bitcoin-buying spree for years, weathering MULTIPLE bear markets, including the infamous 2022 plunge from ~$70K to ~$15K. Is this time truly different?” the analysts ponder, as if consulting a crystal ball. 🔮

MicroStrategy’s operations, it seems, are akin to a high-stakes game of poker, relying on raising capital—often through convertible notes—to acquire more Bitcoin. The Kobeissi Letter points out that the firm currently carries about $8.2 billion in total debt for its Bitcoin holdings, representing a leverage ratio of roughly 19%. Much of this debt is tied up in convertible notes maturing around 2028, which sounds like a plot twist waiting to happen! 🎲

“The only way a ‘forced liquidation’ might occur is if there’s a ‘fundamental change’ at the company. This could mean MSTR would have to liquidate its Bitcoin stash if an early redemption is called on the notes,” the experts opine, as if they were discussing the fate of a tragic hero. 🦸‍♂️

A “fundamental change” could involve corporate bankruptcy or a shareholder vote to dissolve the company—both scenarios that The Kobeissi Letter assures us are as likely as finding a unicorn in the office. Michael Saylor, the Executive Chairman and Bitcoin’s most fervent cheerleader, holds 46.8% of the company’s voting power, effectively blocking any liquidation decisions. Talk about a power play! 💪

Despite the steep decline in share price, The Kobeissi Letter suggests that an outright forced liquidation is “highly unlikely.” The structure of the convertible notes and MicroStrategy’s knack for raising capital provide them with a significant safety net. However, should Bitcoin experience a prolonged and severe price drop—well below its current levels—MicroStrategy might find itself in a pickle when it comes to servicing its debt and raising fresh capital. 🥒

“But what if these convertible bonds remain below the conversion price at maturity, starting in 2027+? For this to happen, Bitcoin would need to plummet over 50% from current levels and stay there,” they warn, as if foretelling a storm. ⛈️

Michael Saylor, ever the optimist, has brushed off the liquidation scenario with a wave of his hand. According to The Kobeissi Letter: “When asked about liquidation, Saylor declared that even if Bitcoin fell to $1, they still wouldn’t get liquidated. They would ‘just buy all of the Bitcoin.’ While this sounds delightful in theory, let us not forget the convertible note holders lurking in the shadows.” 😏

MicroStrategy’s business model—raising funds to buy Bitcoin, potentially driving the price higher, and then issuing new shares at a premium—hinges on investor confidence. If shares continue to falter, or if Bitcoin dives well below MicroStrategy’s average entry price, the firm

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2025-02-26 17:11