MicroStrategy's Bitcoin Holdings and Financial Position

Analysts at BitMEX Research argued that MicroStrategy is “highly unlikely” to be forced to sell its bitcoin holdings based on its current debt structure. However, they acknowledged that “anything is possible” given the volatility of cryptocurrency.

The business intelligence firm is the largest corporate holder of bitcoin, with 252,220 BTC, currently valued at over $17 billion, at a total cost of around $9.9 billion.

MicroStrategy’s stock gained more than 10% on Thursday, reaching a 25-year high of $235.89 as of market close, according to TradingView. The firm's $43.6 billion market cap trades at a “massive premium” to the net asset value of its underlying bitcoin holdings, somewhat reminiscent of The Grayscale Bitcoin Trust in prior cycles before its conversion to a spot Bitcoin exchange-traded fund.


MicroStrategy has leveraged premium share issuances to buy more bitcoin, boosting book value per share in a so-called “infinite money glitch.” The firm’s five equity offerings since launching its bitcoin strategy in 2020 have raised a total of $4.25 billion. Last week, Benchmark analyst Mark Palmer defended MicroStrategy stock's big premium to its bitcoin holdings, describing it as “intelligent leverage.”

MicroStrategy founder and Executive Chairman Michael Saylor has previously stated that he has no intention of selling the company’s bitcoin. However, due to the company's substantial holdings in the volatile asset and significant debt levels, some question whether the company might have to sell its bitcoin holdings, risking a downward price spiral.

No Easy Answer

The BitMEX Research analysts noted that there was no straightforward answer regarding forced sales. The bonds come with complex conversion options that allow bondholders to either convert to MSTR shares or request cash redemption based on conditions like stock performance and bond maturity. Most bonds enable MicroStrategy to redeem for cash if shares trade at a premium, while bondholders might convert to shares if bitcoin prices are strong.

Analysts explained that while interest payments could theoretically pressure MicroStrategy, cash flow from its software business should cover these costs without necessitating bitcoin sales, even if prices fall. Consequently, since MicroStrategy’s bonds are not a major part of its capital structure, forced bitcoin sales to meet bond obligations seem unlikely.

Even if bitcoin were to drop by a typical bear market of 80% to around $15,000, and the company could not raise more debt, the maturity and bondholder option dates are spread across specific periods from 2027 to 2031, reducing immediate liquidation pressure. However, should MicroStrategy’s stock premium shift to a discount and bond repayments come due, it might become advantageous for shareholders to support bitcoin sales.

In summary, while the stock trades at a premium, there is minimal incentive to sell bitcoin. Still, if the debt increases, so does risk, raising the possibility of forced sales in a downturn. As of now, “the leverage is low and the liquidation risk is low.”