Silvergate Issues Bitcoin-collateralized Loan to MicroStrategy Subsidiary
The $205 million loan can be used to purchase more bitcoins or for general corporate purposes
MicroStrategy’s Michael Saylor | Blockworks exclusive art by axel rangel
key takeaways
- The loan was made under the Silvergate Exchange Network Leverage program, which had $570 million in commitments at the end of 2021
- MicroStrategy last reported that it was holding 125,051 bitcoins, which were acquired for nearly $3.8 billion
Silvergate Bank has issued a $205 million loan to MicroStrategy subsidiary MacroStrategy, allowing the company to buy more bitcoin.
The interest-only term loan is secured by bitcoin held in MacroStrategy’s collateral account. In addition to allowing the company to purchase more bitcoins, the loan may be used to pay expenses related to the loan transaction or for general corporate purposes, according to a Tuesday company announcement.
The loan was made under the Silvergate Exchange Network (SEN) Leverage program. Founded in 2020, SEN Leverage grew to roughly $570 million in commitments, as of Dec. 31.
“[MicroStrategy’s] innovative approach to treasury management is an exceptional example of how institutions can utilize their bitcoin to support and grow their business,” Silvergate CEO Alan Lane said.
A Silvergate spokesperson declined to comment further.
MicroStrategy bought 10,300 bitcoins during the fourth quarter of 2021 for an average price of $57,113 following a capital raise through the firm’s at-the-market equity offering. The Virginia-based analytics and business intelligence company purchased an additional 660 bitcoins between Dec. 30 and Jan. 31 for roughly $25 million in cash — amounting to $37,865 per bitcoin.
The buys brought the company’s total held bitcoin to 125,051, which were acquired for nearly $3.8 billion. MicroStrategy is the world’s largest publicly traded corporate owner of bitcoin.
About 110,000 of the company’s bitcoins are not pledged as collateral and could be used to generate yield or to leverage, MicroStrategy CEO Michael Saylor said during a Feb. 1 earnings call.
He added at the time that the company planned to continue using free cash flow to buy more bitcoins, and would evaluate opportunities to raise additional capital as a way to purchase the digital asset.
“The SEN Leverage loan gives us an opportunity to further our position as the leading public company investor in bitcoin,” Saylor said in a statement.
“Using the capital from the loan, we’ve effectively turned our bitcoin into productive collateral, which allows us to further execute against our business strategy.”
A MicroStrategy representative did not immediately return a request for comment. Bitcoin’s price was about $47,800 at 11 am ET, according to data compiled by Blockworks — up 0.5% in the past 24 hours and roughly 16.4% from seven days ago.
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