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Ask HN: What happens if MicroStrategy gets a margin call?

So its in the news that MicroStrategy took out a huge loan to buy bitcoin and that if the prices falls to ~$21,000 that they would receive a margin call on the loan. https://www.cnbc.com/2022/06/15/bitcoin-microstrategy-denies-it-received-margin-call-against-silvergate-loan.html So the question is, what is the consequences of this? Will MSTR have to sell some of their bitcoin further fueling the sell-off? Do they just borrow against other collateral? Is this a big deal or a non-event?

Miner49er 4y ago
It already fell below $21k and they weren't margin called, apparently. I guess they have the funds to cover.
- Eddy_Viscosity2 4y ago
  If they weren't margin called then they wouldn't need funds to cover. So it's still a question whether they do or not. Oh course that leads to a second question on why they weren't margin called if the price dropped below the price they publicly said would trigger a margin call.
  - Miner49er 4y ago
    From the article OP included: “MicroStrategy has not received a ‘margin call’ against our Silvergate loan even as bitcoin prices have fluctuated recently,” the company told Reuters in an emailed statement. “We can always contribute additional bitcoins to maintain the required loan-to-value ratio … even at current prices, we continue to maintain more than sufficient additional unpledged bitcoins to meet our requirements under the loan agreement,” The way I read that is they covered before they got margin called.
hnthrowaway0328 4y ago
The fact that the company invests heavily in Bitcoin is a surprise for me. After a second thought this probably is a bit more risky but no different in essence from other investments, in bonds or in stocks. Still I hope what the CEO said was true i.e. the company has enough $$ to cover its loan. There could be other black swan events that blocks converting Bitcoin to USD.
shinryuu 4y ago
A margin call is an event where you have to either deposit additional funds or sell some of the assets. So getting margin called when you have additional funds doesn't have to be a big event.

Miner49er 4y ago

It already fell below $21k and they weren't margin called, apparently. I guess they have the funds to cover.

Eddy_Viscosity2 4y ago
If they weren't margin called then they wouldn't need funds to cover. So it's still a question whether they do or not. Oh course that leads to a second question on why they weren't margin called if the price dropped below the price they publicly said would trigger a margin call.
- Miner49er 4y ago
  From the article OP included: “MicroStrategy has not received a ‘margin call’ against our Silvergate loan even as bitcoin prices have fluctuated recently,” the company told Reuters in an emailed statement. “We can always contribute additional bitcoins to maintain the required loan-to-value ratio … even at current prices, we continue to maintain more than sufficient additional unpledged bitcoins to meet our requirements under the loan agreement,” The way I read that is they covered before they got margin called.

hnthrowaway0328 4y ago

The fact that the company invests heavily in Bitcoin is a surprise for me. After a second thought this probably is a bit more risky but no different in essence from other investments, in bonds or in stocks. Still I hope what the CEO said was true i.e. the company has enough $$ to cover its loan. There could be other black swan events that blocks converting Bitcoin to USD.

shinryuu 4y ago

A margin call is an event where you have to either deposit additional funds or sell some of the assets. So getting margin called when you have additional funds doesn't have to be a big event.