Cryptocurrency News

MicroStrategy stock slides after announcing new $400M loan increase to buy bitcoin


A weak balance sheet, excessive debt load, and highly leveraged exposure to bitcoin (B T c) MicroStrategy has crashed (mstr) already over 63% of the stock since February 2021. Still, the business intelligence company has overlooked the risks of its worthless valuation; It now wants to raise more debt and buy bitcoin with the proceeds.

micro strategy announced Monday morning that it intends to “raise the total principal amount of senior secured notes $400 million in a private offering” […] To acquire additional bitcoins.” The company has more than 92,000 BTC worth about $3.31 billion at current exchange rates, which is roughly 1.5 times its principal investment.

BTC/USD (blue) vs MSTR (orange) YTD performance. Source: TradingView

MSTR fell 2.17% to $469.29 per share after the New York opening bell on Monday. At its year-over-year high, it was changing hands for $1,135.

not making money

In its previous statements, MicroStrategy has already clarified That it is building a bitcoin portfolio as an insurance policy against the continued devaluation of the world’s major currencies. But with its back-to-back bitcoin purchases, the company has effectively protected itself from more than just the fall in the US dollar. Hint: unprofitable business lines.

MicroStrategy’s net income growth in 2020 fell 121.90%. Source: WSJ

A glance MicroStrategy’s Alternative Asset Holdings It also shows that the company is highly inclined towards bitcoin, with real estate accounting for less than 0.2% of total investments.

Its latest quarterly report also showed a weak balance sheet, with a debt-to-equity ratio at 4.55 – a significant debt load of $1.66 billion against an equity valuation of $0.37 billion – as of March 31, 2020.

MicroStrategy had $2.44 billion in assets as of March 2021, of which $1.947 billion was bitcoin. Source: WSJ

This is especially risky when bitcoin price fluctuations is taken into account. MicroStrategy does not generate enough income to meet its debt load and relies heavily on bitcoin’s profits to do so. In addition, it seeks to raise another $300 million, although its convertible notes are not due to maturity until 2028.

CETF/ETF fund strategist Juan de la Hoz feared that Microstrategy risks bankruptcy if bitcoin falls by more than 50% in the future, reminiscent of the major cryptocurrencies’ massive declines in 2014 and 2018. The analyst said that MicroStrategy will most likely be. Liquidate your bitcoin holdings to avoid bankruptcy.

hozu famous That he would not invest in cryptocurrencies through leverage, nor would he invest in a company that did so, indicates his extremely bearish outlook for microstrategy and bitcoin, in a row.

It’s too risky, you can lose it all, and I wouldn’t want to take that chance.

Bitcoin prices slumbered early this morning via Microstrategy’s announcement. BTC/USD exchange rate continued to trade sideways while maintaining support above $36,000.