MicroStrategy denies receiving margin call on Silvergate loan
Software company MicroStrategy has not received a margin call on its loan from crypto-specialty bank Silvergate, Reuters reported on Wednesday.
Valerie Plesch | Bloomberg | Getty Images
Aggressive bitcoin investor and U.S. software firm MicroStrategy says it hasn’t received a margin call on a $205 million bitcoin-backed loan it took out in March, according to a report from Reuters published on Wednesday.
A margin call is a situation where an investor must commit more funds to avoid losses on a trade made with borrowed money.
CNBC reported on Tuesday that investors feared that MicroStrategy, which bet $4 billion on bitcoin, could be forced to liquidate some of its bitcoin holdings if it faced a margin call.
MicroStrategy did not respond to a request for comment from CNBC prior to the publication of this report.
The world’s largest cryptocurrency briefly dipped below $21,000 on Tuesday during this week’s big selloff. Shares of MicroStrategy, seen by some as a proxy for investing in bitcoin, have fallen more than 70% since the start of the year.
Bitcoin was trading at $21,184.99 as of 12:52 a.m. ET on Wednesday.
In March, MicroStrategy borrowed $205 million in a three-year loan from crypto-specialty bank Silvergate to buy more bitcoin, using its own bitcoin holdings to secure the loan.
As of 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 in bitcoin.
MicroStrategy’s CFO previously pointed out in May that if bitcoin fell below $21,000, it could trigger a margin call.
“MicroStrategy has not received a ‘margin call’ against our Silvergate loan, even though bitcoin prices have fluctuated recently,” the company told Reuters in an emailed statement.
“We can always bring in additional bitcoin to maintain the required loan-to-value ratio…even at current prices, we continue to maintain more than enough uncommitted additional bitcoin to meet our requirements under the loan agreement,” said said MicroStrategy. The loan-to-value ratio is a measure of how risky a loan is, comparing the amount borrowed to the value of the asset.
Earlier in June, MicroStrategy CEO Michael Saylor said the company had more than enough bitcoin to cover its lending needs. He said bitcoin prices would need to drop below $3,500 before more collateral is needed.
Saylor also said in a tweet on Tuesday that the company anticipated the volatility and structured its balance sheet so that it could remain invested.
MicroStrategy did not immediately respond to a Wednesday request for comment from CNBC.
– CNBC’s Ryan Browne contributed to this report.