MicroStrategy Stock Falls 23% on Bitcoin Plunge

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Shares of

MicroStrategy Inc.

MSTR -25.18%

tumbled Monday as investors fretted over what a brutal selloff in cryptocurrencies would mean for the software company’s finances.

The stock fell 23% in midafternoon trading and has lost more than 70% of its value this year.

MicroStrategy, a maker of business-intelligence software, turned to bitcoin two years ago as a hedge against inflation. The company has repeatedly added to its position and in March borrowed $205 million from

Silvergate Capital Corp.’s

SI -16.69%

Silvergate Bank to buy more of the digital asset. The company said in May it would face a margin call on that debt should the price of bitcoin drop to about $21,000.

The crypto rout deepened this past weekend with bitcoin falling to $22,611 on Monday afternoon. The selloff also brought the terms of MicroStrategy’s debt agreement into focus for investors, some of whom had flocked to the company’s shares following its August 2020 announcement to adopt bitcoin as its “primary treasury reserve asset.”

“We don’t expect to receive a margin call, and the company has plenty of additional collateral should we need to post more,”

Michael Saylor,

MicroStrategy’s founder and chief executive, wrote Monday in an email to The Wall Street Journal.

MicroStrategy’s bitcoin holdings were worth $5.9 billion at the end of March, the company said. It held 129,218 bitcoins then.

Earlier on Monday, Mr. Saylor tweeted, “In Bitcoin We Trust,” to his 2.5 million followers.

A spokeswoman for Silvergate declined to comment.

On a May 8 conference call with analysts, MicroStrategy’s Phong Le said that bitcoin would have to drop by half, to about $21,000, before the company would face a margin call on the loan it took to add to its holdings in the cryptocurrency. That call, Mr. Le said, would occur once the debt’s loan-to-value ratio rose to 50%.

“That said, before it gets to 50%, we could contribute more bitcoin to the collateral package, so it never gets there,” he said.

Write to Justin Baer at [email protected] and Paul Vigna at [email protected]

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