MicroStrategy: $205 million loan to buy more Bitcoin

Michael Saylor’s company MicroStrategy uses BTC as collateral for a loan to buy more Bitcoin.

MicroStrategy’s Bitcoin buying strategy

Yesterday, MicroStrategy announced that MacroStrategy has obtained a three-year $205 million loan to purchase Bitcoin, to pay fees, interest and expenses related to the loan transaction and for general corporate purposes of MacroStrategy or MicroStrategy.

MacroStrategy LLC is a wholly-owned subsidiary of Michael Saylor‘s company, MicroStrategy Incorporated. 

The loan was provided by Silvergate Bank, a subsidiary of Silvergate Capital Corporation, a company listed on the NYSE under the ticker SI. 

Silvergate is a provider of innovative financial infrastructure solutions and services for the crypto industry, and issued the term loan to MacroStrategy as part of its Silvergate Exchange Network (SEN) Leverage programme. 

The loan is backed by BTC held in MacroStrategy’s collateral account. 

MacroStrategy’s parent company, MicroStrategy, already holds about $5.9 billion in Bitcoin, and in fact is continuing to acquire Bitcoin through its enterprise software unit. 

The document filed with the SEC regarding this transaction shows that the loan will mature on 23 March 2025, and accrues interest at a variable rate. Interest will be paid monthly. 

The loan was secured with BTC worth approximately $820 million at the time of execution. MacroStrategy must maintain a ratio between the amount of the loan and the value of the collateral of 50% or less, i.e. with BTC as collateral worth at least $410 million. 

In other words, they used Bitcoin as collateral to obtain a dollar loan with which to buy more Bitcoin. 

Statements from the CEOs of MicroStrategy and Silvergate

President and CEO of MicroStrategy, Michael Saylor, said: 

“The SEN Leverage loan gives us an opportunity to further our position as the leading public company investor in bitcoin. Using the capital from the loan, we’ve effectively turned our bitcoin into productive collateral, which allows us to further execute against our business strategy”.

Silvergate CEO Alan Lane commented: 

“We’re thrilled to add MicroStrategy to our growing list of SEN Leverage borrowers. Their innovative approach to treasury management is an exceptional example of how institutions can utilize their bitcoin to support and grow their business”.