- MicroStrategy CEO Michael Saylor sees no alternative to turning his company's stock into a highly levered bitcoin bet.
- "I can't come up with a better idea," Saylor told CNBC in an interview on Wednesday.
- MicroStrategy has more than $1 billion in unrealized losses on its bitcoin position it dropped to near $21,000.
MicroStrategy CEO Michael Saylor has no regrets in turning his company's stock into a highly levered bet on the price of bitcoin, even as the cryptocurrency continued its 70% peak-to-trough decline to about $21,000 on Wednesday.
In an interview with CNBC, Saylor defended his actions and said, "I can't come up with a better idea," adding that he feels that his company has a "fortress balance sheet" because it took out billions of dollars of debt at an interest rate of 1.8%, just before interest rates doubled.
"If you had a chance to grab $2 billion at 1.5% interest, it seems like a reasonable thing to do and I'm glad we did it," Saylor said.
With regards to MicroStrategy's margin loan on bitcoin, which the company's CFO revealed $21,000 as a key level to watch in its first-quarter earnings call, Saylor isn't concerned.
"We've only got a $200 million loan that we have to collateralize, and we're 10x over-collateralized on that right now. If the market traded down by a factor of 10, we got cash and we generate cash flow, so the margin call is much ado about nothing," Saylor said, adding that MicroStrategy's margin loan is well balanced.
Investors don't seem to agree with Saylor's assessment, as the firms bonds are trading well below par and MicroStrategy's current market valuation of $1.9 billion is well below the market value of the firm's bitcoin holdings, which stood at $2.7 billion as of Wednesday afternoon.
MicroStrategy has purchased 129,219 bitcoins at an average price of $30,700. That means the firm is currently sitting on an unrealized loss of more than $1 billion.
But Saylor is still optimistic about the outlook for the price of bitcoin, and said it's still one of the best performing asset classes when you zoom out far enough.
"The biggest idea here is bitcoin is the first and the only legitimate scarcity in the universe. Gold is not scarce. They just found 320,000 tons of gold in Uganda... so bitcoin is the ideal commodity because you can't make anymore of it," Saylor said.
As to whether investors should step in and buy the cryptocurrency at current levels, Saylor said it all depends on your time horizon.
"If your time horizon is one month, Bitcoin looks like a volatile asset. If your time horizon is 10 years, it looks like a risk-off store of value," Saylor argued, adding that any investor of bitcoin should plan to hold the cryptocurrency for at least four years.
While bitcoin is down about 70% from its record high of $69,000 reached in November, MicroStrategy stock is down 87% from its February 2021 high of $1,315 per share. MicroStrategy stock jumped 5% on Wednesday.
