I am quite certain their position on taking a loan against their bitcoin to buy more bitcoin is
safe because they have more bitcoin to deposit in their account to avoid a margin call. However, taking leverage by borrowing against a volatile asset to buy the same volatile asset is very risky. The real whales of the cryptospace, Sam Bankman Fried, Changpeng Zhao and Arthur Hayes and the cryptofunds who follow them can manipulate the market to liquidate Michael Saylor.
MicroStrategys CFO Phong Le explained in the companys first-quarter earnings call on Tuesday that if Bitcoins price falls below $21,000, or around 50% from current levels, it will be forced to pony up more cryptocurrency to back its $205 million Bitcoin-collateralized loan with Silvergate Bank that was used to buy Bitcoin in the first place.
"We took out the loan at a 25% LTV; the margin call occurs at 50% LTV, Le said. So essentially, Bitcoin needs to cut in half, or around $21,000, before wed have a margin call.
The CFO noted that MicroStrategy still holds quite a bit of uncollateralized Bitcoin that it could use to answer any potential margin call, however.
As you can see, we mentioned previously we have quite a bit of uncollateralized Bitcoin, Le said. So we have more that we could contribute in the case that we have a lot of downward volatility. But again, we're talking about $21,000 before we get to a point where there needs to be more margin or more collateral contributors. So I think we're in a pretty comfortable place where we are right now.Read in full https://fortune.com/2022/05/04/michael-saylor-microstrategy-margin-call-bitcoin/Not far to go now, looks like that Margin call will be before July.
https://www.investopedia.com/ask/answers/12/what-happens-cannot-pay-margin-call.asp
A margin account allows investors to borrow funds from their broker in order to leverage larger positions with the cash they have available, boosting their buying power.
A margin call occurs when the value of the account falls below a certain threshold, forcing the investor to add more money in order to satisfy the loan terms from the broker or regulators.
If a margin call is issued and the investor is unable to bring their investment up to the minimum requirements, the broker has the right to sell off the positions and also charge any commissions, fees, and interest to the account holder.
If the Margin Call forces MicroStrategy into bankruptcy, all it's shareholders will be wiped out of their ownership of MicroStrategy.
Which includes :
https://money.cnn.com/quote/shareholders/shareholders.html?symb=MSTR&subView=institutionalLatest Institutional Activity
3/31/2022 THE VANGUARD GROUP, INC. Bought 235.3 Thousand shares of Microstrategy Inc
3/31/2022 RENAISSANCE TECHNOLOGIES LLC Bought 86.3 Thousand shares of Microstrategy Inc
3/31/2022 BLACKROCK FUND ADVISORS Bought 55.7 Thousand shares of Microstrategy Inc
Top 10 Owners of Microstrategy Inc
Stockholder Stake Shares
owned Total value ($) Shares
bought sold Total
change
Capital Research & Management Co.... 14.81% 1,382,463 365,924,131 +43,838 +3.27%
The Vanguard Group, Inc. 9.25% 863,454 228,547,639 +235,330 +37.47%
Capital Research & Management Co.... 6.67% 622,941 164,886,253 +34,945 +5.94%
BlackRock Fund Advisors 6.12% 570,713 151,062,024 +55,724 +10.82%
First Trust Advisors LP 2.43% 226,800 60,031,692 +54,911 +31.95%
SSgA Funds Management, Inc. 1.98% 185,047 48,980,090 +18,460 +11.08%
Geode Capital Management LLC 1.77% 165,066 43,691,320 +21,075 +14.64%
Morgan Stanley & Co. LLC 1.62% 151,379 40,068,508 -69,791 -31.56%
Morgan Stanley Investment Managem... 1.33% 123,984 32,817,325 -9,532 -7.14%
Norges Bank Investment Management 1.09% 101,658 26,907,856 -31,610 -23.72%
Top 10 Mutual Funds Holding Microstrategy Inc
Mutual fund Stake Shares
owned Total value ($) Shares
bought sold Total
change
American Funds Growth Fund of Ame... 9.37% 874,232 231,400,468 0 0.00%
American Funds Fundamental Invest... 4.59% 427,918 113,265,615 +43,920 +11.44%
American Funds Insurance Series -... 3.84% 358,514 94,895,071 0 0.00%
Vanguard Total Stock Market Index... 2.90% 270,451 71,585,675 +285 +0.11%
Vanguard Small Cap Index Fund 2.51% 233,840 61,895,110 +332 +0.14%
iShares Russell 2000 ETF 2.25% 209,845 55,543,873 +684 +0.33%
American Funds Insurance Series -... 2.19% 203,897 53,969,497 0 0.00%
First Trust Cloud Computing ETF 1.92% 179,508 47,513,973 0 0.00%
Vanguard Small Cap Growth Index F... 1.51% 141,053 37,335,319 -54 -0.04%
Vanguard Extended Market Index Fu... 1.31% 122,395 32,396,733 -229 -0.19%
Interesting, it looks like a collapse in the Price of BTC to <$21K could end up tanking a large % of the stock market.
