What happens if MicroStrategy can’t sell enough bitcoin to repay lenders?
Despite widespread acknowledgment that MicroStrategy has issued a tremendous amount of debt to acquire most of its bitcoin, some star-struck novices believe that billionaire CEO Michael Saylor has no liquidation risk on this debt. Although the nuances of the term ‘liquidation’ are important, there are people who honestly believe that MicroStrategy cannot default on its debt no matter how low the price of bitcoin goes. That is not true. There is no free lunch on Wall Street. Lenders to MicroStrategy do have a risk of default. Specifically, they are loaning USD to MicroStrategy and expect USD or USD-equivalent repayment. Even lenders in recent series who waived all interest payments expect to receive their principal back at maturity. To be clear, no lenders have agreed to accept repayment in bitcoin, and no lenders have agreed to denominate their principal repayment in bitcoin. They lent USD and expect the USD, or its equivalent or extra amount of MSTR shares, upon loan ...