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Following significant declines in Bitcoin 
$104,180 prices, discussions about MicroStrategy’s liquidation risk have resurfaced. The company’s recent name change to Strategy has sparked debates regarding the potential sale of approximately half a million Bitcoins, valued at around $44 billion. This raises the question: is such a sale feasible?
Could Strategy Sell Bitcoin?
Specifically, might the newly named Strategy be forced to sell its BTC assets acquired through debt issuance? The Kobeissi Letter addressed this issue and provided insights. The company experienced a 55% drop in stock value following its peak during the Trump excitement, raising concerns among stakeholders.
Currently, Strategy holds Bitcoin worth approximately $499,096, equating to about $44 billion when disregarding price volatility. The average acquisition cost has risen to around $66,350 per BTC after the latest $2 billion purchases. Investors are worried about the liquidation price, which reflects a BTC price dropping to or below this average cost.
Discussions Around Strategy’s Liquidation
Since 2020, Strategy has consistently acquired BTC and has plans to continue this trend. Saylor has indicated a commitment to this strategy for at least three more years. Historical data shows that the bear market in 2022, with Bitcoin plummeting from $70,000 to $15,500, was particularly challenging, with prices falling significantly below the average acquisition cost.
The company’s strategy relies heavily on increasing capital capacity. However, if liabilities exceed assets significantly, this ability may diminish. The data suggests that continued declines in BTC prices could lead to prolonged low-value situations.
The company’s cash-generation model consists of four steps: borrowing through convertible bonds, purchasing BTC, buying new shares at a premium, and continuously repeating this process. Currently, the company holds $8.2 billion in total debt against Bitcoin worth $43.4 billion.
The only scenario that could lead to mandatory liquidation is a “fundamental change” within the company, potentially necessitating the liquidation of Bitcoin assets. This would require shareholder approval, indicating a vote or corporate bankruptcy must precede any liquidation.
Michael Saylor’s substantial voting power of 46.8% further complicates the likelihood of a shareholder vote passing in favor of liquidation. Overall, it appears that serious discussions about liquidation will not arise until at least 2027.
