MicroStrategy’s bond drops as Bitcoin (BTC) falls

The price of the $500 million MicroStrategy bond has dropped by approximately three points. The company, headed by famous Bitcoin uber-bull Michael Saylor, is directly impacted by the fall of Bitcoin.

Another $500 million investment in Bitcoin

MicroStrategy announced on Monday that they have finalised the purchase of 13,005 BTC at average price of $37,617 each (approximately £357.8 million in total).

MicroStrategy is a software company and the leading Bitcoin holder among listed companies. With total investments of around $2.74 billion (~£1.96 billion), MicroStrategy now holds 105,085 BTC, surpassing Tesla with its 43,200 BTC, Square (8,027 BTC), Marathon Digital (5,425 BTC), Coinbase (4,487 BTC), and Galaxy Digital (4,000 BTC).

The listed companies hold $6.3 billion (~£4.51 billion) in Bitcoin in total, which is less than 1% of the total Bitcoin’s capitalization.

Wishing to finance the new transaction, MicroStrategy has issued a $500 million (~£357.8 million) bond.

MicroStrategy bond drops below par

On Tuesday, the price on the bond was trading at 97.75 cents on the dollar, down from 100.62 on Friday, according to Trace, a bond pricing service. For now, the bond is below par.

Yields were at 6.53% on Tuesday, 40.5 basis points higher than its coupon rate of 6.125%.

The bond is due 2028 and is guaranteed by the new Bitcoin MicroStrategy purchased, but also by any other digital asset the company acquires in the future.

Still in the green

Currently, Bitcoin is trading at around $33,378 which represents a drop by more than 10% compared to the Monday prices. In other words, the 105,084 BTC held by the software company are currently worth $3.56 billion (~£2.55 billion), the company’s assets have depreciated by $500 million (~£357.8 million).

However, MicroStrategy is still in the green. $3.56 billion (~£2.55 billion) represent an additional $800 million (~£572 million) to the $2.74 billion (~£1.94 billion) invested in Bitcoin.

With cryptocurrencies and Bitcoin in particular being tremendously volatile, companies investing in this market are playing with a lot of risk. MicroStrategy is a clear example with its assets undergoing a $500 million depreciation. Yet, even if there are falls, Bitcoin still demonstrates a solid upward trend.

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DISCLAIMER
The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.
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