MicroStrategy, which has evaporated $77 million and holds 100,000 BTC, what is the aftermarket?
The bitcoin assets held have accounted for 55% of the total market cap.
On the evening of June 21, the crypto world witnessed another “dark moment”. After bitcoin mines were completely retired in mainland China, the People’s Bank of China (PBoC) released a message on its official website at around 5:00 pm on June 21, saying that it had interviewed some central banks and payment institutions regarding the speculation of virtual currency transactions. Subsequently, ICBC and Alipay and other participating institutions issued a succession of documents saying that they would resolutely cut off the capital payment chain for speculative activities in virtual currency trading in accordance with the relevant requirements of the PBoC.
This move points directly to the core of virtual currency trading – over-the-counter access to funds. The market panic instantly increased dramatically and the price of bitcoin fell in response, currently oscillating downward near $31,000.
One, just after buying a huge amount of bitcoin, suffered a big drop
Not only ordinary retail investors and large institutional investors were hit by this onslaught, but MicroStrategy, a publicly traded company in the U.S., also lost a lot of money because it just completed a bitcoin deal totaling $489 million in recent days. According to U.S. accounting standards and data compiled by Bloomberg, MicroStrategy will face a $77 million write-down of its assets as a result of the crash.
According to the company’s filings and data compiled by the agency, the company’s total bitcoin-related losses have exceeded $500 million. MicroStrategy, which has always been a “buy-low, operate-against-the-trend” company, has fallen on its face this time.
But even the plummeting market doesn’t seem to have shaken MicroStrategy’s bearish attitude towards bitcoin. Even after the more dramatic 5.19 market, MicroStrategy issued an announcement saying that bitcoin is the company’s primary value reserve option and that it has no intention of selling bitcoin and is prepared to “hold it for 100 years”. That’s why the national media gave him the nickname “Dead Long”. So, what is MicroStrategy’s obsession with Bitcoin?
Two: Betting on Bitcoin after a series of losses
Publicly available information shows that MicroStrategy is a technology research and development company specializing in providing business intelligence services, mainly for the accurate analysis of internal and external data of B-side customers to help customers make better business decisions and facilitate the development of applications for developers. The company was founded in 1989 and is headquartered in Washington, DC, USA. Its main competitors are SAP, Oracle and IBM, which provide business intelligence service products. MicroStrategy also pays more attention to the product experience of Chinese users and has over 300 R&D staff in China. It is worth noting that MicroStrategy had to pay a fine of $11 million to the SEC in 2000 due to false accounting, of which the founder Michael Saylor was responsible for $8.2 million, and Michael Saylor himself has been the CEO of the company since then.
Michael Saylor, founder of MicroStrategy
MicroStrategy took off quickly on the back of the Internet technology dividend that burgeoned around the turn of the millennium. But as the Internet dividend declined sharply, its growth also hit a bottleneck. Public data show that MicroStrategy’s operating profit has been going downhill since 2015. 2015 profit reached $134 million, and by 2019 it had plummeted to $3.981 million, with a loss of $1 million in 2019. 2020 fiscal year net profit was -$7.5240 million, down 121.9% year-on-year, and the loss surface Further expansion. MicroStrategy, which is ready to find another way out, has set its eyes on cryptocurrencies.
On August 11, 2020, MicroStrategy made a major purchase of 21,454 BTC for $250 million, with an average price of about $11,653 per bitcoin. This was MicroStrategy’s first bitcoin transaction, and it went from there. in September, another 16,796 BTC were purchased for $175 million, with an average price of about $10,419 a bitcoin. on December 5, 2,574 bitcoins were purchased for $50 million, with an average price of about $19,427 a bitcoin. on December 21, the MicroStrategy used $650 million raised through convertible bonds to purchase 29,646 bitcoins at an average price of about $21,925 a bitcoin.
In the following 2021, MicroStrategy made several more large purchases of bitcoins and raised funds by selling shares to investors, issuing high yield bonds, and convertible bonds several times, despite having insufficient cash reserves. Among other things, on June 14, Microstrategy advertised that the company had completed the issuance of $500 million worth of junk bonds (also known as high-coupon bonds, which carry an annual interest rate of 6.125%), with a purchase demand of $1.6 billion, as evidenced by its fervor. In addition, Microstrategy has issued more than $1.5 billion in convertible notes and junk bonds for the purchase of bitcoin since August of last year. Currently, MicroStrategy has over 100,000 bitcoin holdings, making it the highest bitcoin holding of any public company in the world, well above Tesla’s 40,000 or so.
Cryptocurrency circle vlogger Colin Wu (Wu Says Blockchain) believes that MicroStrategy’s fundraising in the capital markets in favor of a big pokie of bitcoin makes its business logic similar to that of an ETF product. The bitcoin ETF, which has been delayed in getting SEC approval due to opaqueness and other issues, could be operating in an indirect way: retail investors are frantically buying stocks and bonds issued by MicroStrategy, which is tantamount to putting money in MicroStrategy’s hands for disguised asset allocation, only the allocation is in the form of a single buy of bitcoin. The grayscale and GBTC, which are widely known to Chinese investors, have a user base that is mainly institutional, and retail investors can only hope for the best. So MicroStrategy, which takes the pro-people, downstream route, is much more connected to the masses and much more popular.
MicroStrategy’s Official Website Includes “BITCOIN” Button
Interestingly, MicroStrategy’s website has a “BITCOIN” button at the bottom of the homepage, which is in the same column as the company’s product offerings, implying that bitcoin investment is the company’s main business.
The “Bitcoin is Hope” website page
When you click on the button, you are redirected to a website called “Bitcoin Represents Hope”, which is full of descriptions of Bitcoin and videos of celebrities, including company executives, singing the praises of Bitcoin. On the website’s Banner page, the founder, Michael Saylor, is quoted as saying, “Bitcoin is a bank in cyberspace run by non-erodible software, a global, more convenient, secure and affordable savings account for hundreds of millions of users, which is tantamount to their own hedge fund account. “
Third, the bull market brought a surge in stock prices, but the future is full of unknowns
In contrast, Michael Saylor has frequently attended cryptocurrency-related events since last August, and has also actively interacted with opinion leaders such as Musk both online and offline, and has repeatedly claimed that bitcoin will completely replace gold by shouting for it through social media and traditional media from time to time.
Driven by the bull market, MicroStrategy’s share price has also gone up, from around $140 on August 11 last year to a peak of $1,300 in February this year, an increase of nearly 10 times. The company’s CEO, Michael Saylor, was ranked 1,362nd on the Forbes 2021 list of the world’s richest people in April this year with a fortune of $2.3 billion. However, its share price is currently oscillating around $600. Therefore, some analysts believe that its share price is highly correlated with the bitcoin trend. This is behind the fact that MicroStrategy’s 100,000 BTC holdings are now valued at $3.16 billion, which already accounts for 55% of its total market capitalization ($5.7 billion).
MicroStrategy Stock Price Chart
When a publicly traded company’s assets, which are highly tied to bitcoin, are bound to endure the fluctuations in asset value that come with its dramatic ups and downs. The $77 million asset write-down brought about by this selloff in the market is likely just the beginning. With the further tightening of regulatory policies in China and the uncertainty of the aftermath of the bitcoin and crypto market, this extremely uncertain market poses a great challenge for MicroStrategy. On top of that, the interest to be paid on the large public bond offering is a potential risk point. In this situation, it will take time to see if MicroStrategy, which has been claiming to be a long term holder and not a seller, can survive this uncertain market.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/microstrategy-which-has-evaporated-77-million-and-holds-100000-btc-what-is-the-aftermarket/
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