MicroStrategy's losses on its Bitcoin bet near US$1b

MICROSTRATEGY founder and chief executive officer Michael Saylor's big bet on Bitcoin has backfired in a major way as the paper loss for his firm's holdings of the largest digital asset has reached roughly US$1 billion.

Over the last 2 years, the software-maker has shelled out US$3.97 billion as it amassed nearly 130,000 Bitcoins. The firm's average purchase price for those tokens has steadily risen with each additional purchase since 2020 and sits at US$30,700 as of Mar 31, according to its latest quarterly filing with the US Securities and Exchange Commission.

With Bitcoin plunging by as much as 17 per cent to US$22,603 on Monday (Jun 13) after crypto lender Celsius Network paused withdrawals, swaps and transfers on its platform, MicroStrategy's holdings are now worth just over US$3 billion. That puts the company's Bitcoin related losses at nearly US$1 billion.    

MicroStrategy plunged 25 per cent to US$152.15 on Monday as part of broader route by cryptocurrency-exposed stocks. Shares of company have become highly correlated with Bitcoin since Saylor started adding the digital currency to its balance sheet in August 2020 as a hedge against inflation instead of holding cash in the corporate treasury.

The Tysons Corner, Virginia-based company was worth US$1.2 billion on Aug 10, 2020, the day before it announced its foray into crypto. Saylor appeared to be unfazed with the latest Bitcoin drop, sending tweets over Twitter that seemed to signify his confidence in the strategy.

Among the issues weighing on the company is the threat that an even deeper drop in Bitcoin prices will require it to post additional collateral for the US$205 million loan it took out in March. MicroStrategy said on conference call in May that if Bitcoin drops to about US$21,000 they would need to post more funds in addition to the US$820 million it originally pledged. BLOOMBERG