MicroStrategy denies it received margin call against Silvergate loan
Software company MicroStrategy has not received a margin call against its loan from crypto-focused bank Silvergate, Reuters reported on Wednesday.
Valerie Plesch | Bloomberg | Getty Images
Aggressive bitcoin investor and American software firm MicroStrategy says it hasn’t received a margin call against a $205 million bitcoin-backed loan it took in March, according to a Reuters report on Wednesday.
A margin call is a situation where an investor has to commit more funds to avoid losses on a trade made with borrowed cash.
CNBC reported on Tuesday that investors were concerned MicroStrategy, which has bet $4 billion on bitcoin, would be forced to liquidate some of its bitcoin holdings if faced with a margin call.
MicroStrategy did not respond to a CNBC request for comment before the publication of that report.
The world’s largest cryptocurrency briefly plunged below $21,000 on Tuesday in this week’s big selloff. Shares of MicroStrategy, considered by some as a proxy for investing in bitcoin, tumbled more than 70% since the start of the year.
Bitcoin was trading at $21,184.99 at 12.52 a.m. ET on Wednesday.
In March, MicroStrategy borrowed $205 million in a three-year loan from crypto-focused bank Silvergate to buy more bitcoin, using its own bitcoin holdings to secure the loan.
As at March 31, MicroStrategy held 129,218 bitcoins, each purchased at an average price of $30,700, according to a company filing. The company is the largest corporate investor of bitcoin.
MicroStrategy’s chief financial officer previously highlighted in May that if bitcoin was to drop below $21,000, it could trigger a margin call.
“MicroStrategy has not received a ‘margin call’ against our Silvergate loan even as bitcoin prices have fluctuated recently,” the company told Reuters in an emailed statement.
“We can always contribute additional bitcoins to maintain the required loan-to-value ratio … even at current prices, we continue to maintain more than sufficient additional unpledged bitcoins to meet our requirements under the loan agreement,” MicroStrategy said. The loan-to-value ratio is a measure of how risky a loan is, by comparing the amount borrowed to the value of the asset.
Earlier in June, MicroStrategy CEO Michael Saylor said the company has more than enough bitcoin to cover its loan requirements. He said bitcoin prices would need to fall below $3,500 before more collateral would be required.
Saylor also said in a tweet on Tuesday that the company anticipated volatility and structured its balance sheet so that it can remain invested.
MicroStrategy did not immediately respond to a Wednesday request for comment by CNBC.
— CNBC’s Ryan Browne contributed to this report.