Shares of MicroStrategy are falling Tuesday, dragged down by the collapse in the price of bitcoin (BTC), the cryptocurrency the firm’s CEO has bet the business-intelligence software company’s future on – a wager that could soon become a money-losing one if bitcoin drops much further.

  • MicroStrategy exploded onto the crypto scene last summer after CEO Michael Saylor used the company's treasury reserves to buy bitcoin. And then he bought some more. And so on. And so on. At last count, the firm held some 105,085 bitcoins, making the firm by far the cryptocurrency's largest known corporate holder.
  • Up until a little more than two months ago, with the bitcoin bull market in full swing, that bet was paying off handsomely. Now, not so much. After reaching an all-time high of more than $64,000 in mid-April, the price of bitcoin has more than halved for several reasons, including concerns about the environmental impact of mining for bitcoin, a crackdown on crypto by China and fears of a hostile regulatory climate in the U.S.
  • With the price of bitcoin currently at around $29,000, it's about $3,000 per coin above the average price of $26,080 that Saylor shelled out for his bitcoin. Should bitcoin fall below that, MicroStrategy's bitcoin gamble would become a money-losing one.
  • As it is, if bitcoin doesn't rebound in a big way by the end of June, MicroStrategy would be forced to write down even the bitcoin it bought just a few days ago.
  • On Monday, the company said it had bought 13,005 bitcoin for $489 million at an average price of $37,617, including transaction costs. If the current Q2 were to close right now with bitcoin trading at about $29,000, MicroStrategy would need to write that purchase down by about $96 million.
  • It's not just shareholders who likely aren't happy with Saylor right now. In addition to using cash flow to buy bitcoin, MicroStrategy has sold debt – some of it convertible – to fund its crypto-buying ways. It also recently said it was going to sell shares to buy more bitcoin, though that currency doesn't buy what it did even a week ago. This past Friday, shares of MicroStrategy closed at $647.39 a share. In recent trading, they were at $517.93, down 11.26% on the day. In February they hit a 52-week high of $1,315.
  • Still, long-time holders know that back in August 2020, when Saylor bought his first bitcoin, the company's shares were less than $200 apiece.
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