MicroStrategy's Strong Financial Position Rules Out Bitcoin Sell-off

Source: CoinTribune Original Title: Hougan Dismisses Bitcoin Sell-off Rumors At Strategy Original Link: https://www.cointribune.com/en/hougan-dismisses-bitcoin-sell-off-rumors-at-strategy/

What if Everyone Was Wrong About MicroStrategy?

While speculation is rife about a potential sale of bitcoins by MicroStrategy led by Michael Saylor, Bitwise’s Chief Investment Officer, Matt Hougan, steps up to methodically dismantle this panic scenario.

Key Points

• MicroStrategy holds over $60 billion in Bitcoin, making it a central player in the crypto ecosystem.
• Concerns emerged after CEO Phong Le mentioned a possible BTC sale “as a last resort.”
• Matt Hougan, CIO of Bitwise, claims MicroStrategy has no reason to sell its bitcoins, even if MSTR stock drops.
• The company holds $1.4 billion in cash and has no debt maturing before 2027.

A Strong Cash Position and No Selling Imperative

While bitcoin stabilizes and analysts anticipate a year-end rally, Matt Hougan, Chief Investment Officer at Bitwise, strongly opposes the idea that MicroStrategy might be forced to sell its massive bitcoin holdings if its stock price falls.

“There is nothing in the drop of MSTR’s price below its net asset value that would force the company to sell its bitcoins,” he stated in a note released Tuesday.

Hougan reminds that the company’s financial structure is designed to withstand market turbulence and that Michael Saylor’s commitment to bitcoin remains intact. He adds that a negative outcome, a sale of assets, “would be very bad for the market, equivalent to two years of inflows into Bitcoin ETFs,” but such a scenario is for him “simply unlikely”.

Several factual indicators confirm the solidity of MicroStrategy’s balance sheet, ruling out a need for liquidation in the near future:

• $1.4 billion available cash
• No debt maturity before 2027, which leaves significant strategic leeway
• About $800 million in interest payments per year, which the company can cover for at least 18 months without selling bitcoins
• The average purchase price of MicroStrategy’s bitcoins is $74,436, about 24% less than the current price of approximately $89,000

These figures support Hougan’s argument. MicroStrategy is not under immediate financial pressure. Its position remains aligned with its bitcoin accumulation strategy, uncompromisingly led by its executive chairman, Michael Saylor.

External Pressure on the Stock, But Not on the Balance Sheet

The recent statement by MicroStrategy’s CEO, Phong Le, triggered renewed tension. He mentioned the possibility of a partial sale of bitcoins as “a last resort solution,” in case the company’s market capitalization falls below the value of its BTC holdings, and its financing options become insufficient.

“In that case, it would be justified to sell some of our bitcoin to preserve earnings per share,” he specified. This phrase, taken out of context, was enough to fuel panic scenarios, even if it does not reflect an immediate or likely intention.

Meanwhile, MSTR stock has declined by 24.69% over the last 30 days. This drop is partly attributed to an October MSCI (Morgan Stanley Capital International) announcement stating that the company could be excluded from some of its indices if more than 50% of its assets are composed of crypto.

This would force index funds to sell their MSTR holdings, increasing downward pressure on the stock. For Matt Hougan, these fears are overestimated: “my experience with index movements shows that their impact is often less than anticipated, and largely priced in advance by the market,” he said. He recalls that MSTR’s inclusion in the Nasdaq-100 in December 2023, despite representing an inflow of $2.1 billion, did not cause a significant price movement.

In response to persistent rumors, MicroStrategy unveils an anti-panic indicator: direct communication on its financial strength. While the market remains nervous, the company wants to reassure about its ability to hold without liquidating its bitcoins. However, the balance remains fragile, and the ecosystem watches every move with increased attention.