MSTR - A balance sheet analysis

MSTR is currently in a precarious situation due to them issuing numerous bonds in order to buy BTC with the proceeds. These were convertible bonds with low/no coupon, and obviously what saylor was hoping for was that the stock (and BTC) would continue to pump, the bonds would be converted, and the debt is then gone. Obviously that strategy isn’t playing out too well. So let’s see where their balance sheet is now

(All numbers in millions and are approximate)

Total assets not including bitcoin: 743, of which 377 are “deferred tax assets” which I don’t think have any value if the company goes bust.
Total liabilities not including bitcoin related debt: 414
Revenue last 12 months: 507
Net Income last 12 months: 78
So the actual company really doesn’t have much going on here, these numbers are quite small.

Now, for the bitcoin related stuff:
Bonds/Loan related to bitcoin: 2405
Maturity of the bonds/loan:
2025: 855
2027: 1050
2028: 500
They currently hold 129200 BTC, which at 18K is worth: 2325

From what I can find online, it says that MSTR bought 129200 BTC @ Avg of 30700 which would cost 3966. Part of this came from the bonds/loan noted above, they spent another 400 of cash they had on their balance sheet and issued around a billion $ worth of shares.

So at this time, if MSTR were to close out their entire BTC position, they would still be able to afford to pay off the debt. However, if BTC continues declining, MSTR could be insolvent as soon as 2025 when a significant chunk of their debt becomes due. Note that only 205MM of the debt is secured by BTC as collateral, the rest of the bonds is unsecured. I think this bankruptcy situation is fairly likely. BTC is basically the biggest asset bubble of all time. It had a market cap of 1 TRILLION at it’s peak, which basically means people think it’s worth as much as a company like AAPL, MSFT, or AMZN, for something that’s purely speculative and the only purpose it serves is you hope that someone will buy it off you later for even more money. The likelihood that this bubble continues popping and doesn’t come back is pretty high.


Hmm, if the buy value of BTC was $3.97B and the current price is $2.32B, that’s an impairment of $1.65B. Q1 reports had equity of $0.86B. If this persists into the end of this month, that means they will have negative equity to report in Q2. (They did take some impairment last quarter bit it was relatively small - about $170M.)

Now this, in and of itself, is not an issue, but it does mean that they will most likely be locked out of the credit markets. Not sure if the bonds have any covenants on this either, apart from the LTV considerations.

MSTR bonds are starting to look like CVNA bonds =/


MSTR is now officially insolvent:

Liabilities exceed assets by $187 million.

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Saylor also stepped down as CEO today

2.7B company issuing 500M in stock to buy bitcoin. What could possibly go wrong.

The SEC filing:

As of September 8, 2022, we held approximately 129,699 bitcoins that were acquired at an aggregate purchase price of $3.977 billion and an average purchase price of approximately $30,664 per bitcoin, inclusive of fees and expenses. As of September 8, 2022, at 4:00 p.m. Eastern Time, the market price of one bitcoin reported on the Coinbase exchange was $19,350.81. As of September 8, 2022, 14,589 of our bitcoins are held directly by MicroStrategy Incorporated and 115,110 of our bitcoins are held by MacroStrategy LLC, a wholly owned subsidiary of MicroStrategy Incorporated. The approximately 14,589 bitcoins held directly by MicroStrategy Incorporated serve as part of the collateral securing our 6.125% Senior Secured Notes due 2028, and approximately 30,051 of the 115,110 bitcoins held by MacroStrategy serve as part of the collateral securing our 2025 Secured Term Loan. We expect to purchase additional bitcoin in future periods, including with the net proceeds from this offering as described under “Use of Proceeds,” though we may also sell bitcoin in future periods as needed to generate cash and cash equivalents and short-term investments for treasury management purposes.

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