MicroStrategy says it could sell Bitcoin to pay long-term debt obligations
MicroStrategy said it does not expect its enterprise analytics software business to generate enough cash for its debt obligations.
MicroStrategy hinted that it could sell some of its Bitcoin (BTC) holdings to fund its long-term debt obligations in the aggregate of $2.208 billion, whose principal is due by 2025.
According to its May 1 filing, MicroStrategy has long-term cash requirements for obligations related to its operating leases, transition tax, and various purchase agreements. The firm added:
“We have principal due upon maturity of our long-term debt instruments in the aggregate of $2.208 billion in addition to $2.4 million in coupon interest due each semi-annual period for the 2025 Convertible Notes, $15.3 million in coupon interest due each semi-annual period for the 2028 Secured Notes, and $0.1 million due monthly in principal and interest related to our other long-term secured debt.”
The business intelligence platform said it does not expect the cash and equivalents generated by its enterprise analytics software business to be sufficient to satisfy these debt obligations.
Due to this, the firm said it would explore different options, which include borrowing against its BTC or the outright sales of some of its holdings.
Other options available to the firm include refinancing the debt obligations, sourcing cash from other sources like issuing and selling shares of its class A common stock, or even settling the Convertible Notes obligations under certain unnamed conditions.
In December 2022, MicroStrategy sold some of its BTC holdings for the first time since it began accumulating. At the time, the company said it sold the assets to generate tax benefits.
However, it has since gone on an accumulation spree this year. During the first quarter, it purchased 7,500 BTC, pushing its total Bitcoin holding to 140,000 BTC — more than the bankrupt crypto exchange Mt. Gox.
Meanwhile, MicroStrategy’s BTC acquisition approach has enticed several traditional financial institutions to buy its stocks to gain indirect exposure to the flagship digital asset. According to chairman Michael Saylor, the company shares have risen by 166% since it adopted the BTC standard in 2020 — outperforming other assets like Gold, Nasdaq, S&P 500, etc.