MicroStrategy says it can survive a crash to $8,000 bitcoin — and plans to “equitize” debt MicroStrategy (MSTR), the Michael Saylor‑led treasury firm that has become the largest corporate holder of bitcoin, told investors it can withstand a collapse in bitcoin’s price to $8,000 and still cover its liabilities — and that it intends to convert some debt into equity rather than issue more senior debt. In a post on X, the company said: “Strategy can withstand a drawdown in $BTC price to $8K and still have sufficient assets to fully cover our debt.” Since adopting bitcoin as a treasury asset in 2020, MicroStrategy has accumulated 714,644 BTC — roughly $49.3 billion at current prices — largely financed through borrowing. The company’s outstanding debt is about $6 billion, the equivalent of roughly 86,956 BTC, while its bitcoin holdings are more than eight times that amount. What MicroStrategy says it can do - The firm argues that even if bitcoin fell to $8,000, its BTC stash would still be worth about $6 billion — enough, it says, to cover its debt. - Debt maturities are staggered, with key dates in 2027 and 2032, so MicroStrategy says it does not face a single immediate lump‑sum obligation. - To reduce future cash‑debt risk, the company plans to “equitize” convertible debt — i.e., let bondholders swap debt for equity — avoiding issuance of new senior borrowings. Why critics are skeptical Analysts and critics say the math looks less reassuring when you factor in how much MicroStrategy originally paid for its bitcoin and the broader capital structure: - Some observers note the firm reportedly paid about $54 billion for its bitcoin position, an average near $76,000 per BTC. A fall to $8,000 would imply an enormous paper loss — on the order of $48 billion — that would alarm lenders and equity holders. - One critic calculated that cash on hand would cover only about 2.5 years of debt and dividend commitments at current rates, while the company’s software business brings in roughly $500 million annually — a modest inflow relative to obligations such as $8.2 billion in convertible bonds and about $8 billion in preferred shares, which carry ongoing dividend-like payments. - In a stressed market, traditional lenders may balk at refinancing a company whose primary asset has collapsed in value, whose conversion options (on convertibles) are effectively worthless, and which has publicly committed to holding BTC long term. New debt might only be available at very high yields (15–20%) — if at all. Convertible bonds, hedge funds and dilution risk Anton Golub, chief business officer at crypto exchange Freedx, warned that “equitizing” convertibles could amount to an implicit transfer of pain to retail shareholders. He and others describe a common convertible‑bond dynamic: - Wall Street hedge funds often buy convertible bonds and perform volatility arbitrage — purchasing bonds cheaply while shorting the stock to isolate option value and collect bond interest. - When the stock price previously traded above conversion triggers (around $400 in this case), funds could convert bonds to equity, close shorts, and erase cash payouts for the issuer. - With shares near $130, conversion is unlikely, so hedge funds may demand cash repayment at maturity instead of converting — which would pressure MicroStrategy’s liquidity. - Golub expects the company will seek to raise cash by issuing new shares — diluting existing shareholders via at‑the‑market (ATM) sales or other equity issuance — rather than making full cash payments to bondholders. “Strategy only looks genius during Bitcoin bull markets. In bear markets, dilution is real and destroys MSTR shareholders,” he wrote. Implications MicroStrategy is presenting a scenario in which a deep drop in bitcoin would not force insolvency, leaning on the size of its BTC holdings and staggered debt maturities. But skeptics argue that severe BTC depreciation would create large paper losses, tight refinancing conditions, and pressure to dilute equity — outcomes that could make life considerably harder for the company and its shareholders. The debate underscores a broader question for corporates that have levered up for crypto exposure: balance‑sheet resilience in bull markets can look very different when prices reverse. Read more AI-generated news on: undefined/news

#BTC