Kevin Rooke, one of the leading figures in the cryptocurrency world, wrote an article about MicroStrategy’s Bitcoin (BTC) breakthrough.
In a comment on Twitter, Rooke said Bitcoin is up 6% today and that’s what could pay off the 5-year interest on MicroStrategy’s $ 650 million debt. In short, if Bitcoin grows by 6% in 5 years, it will be able to pay off MicroStrategy’s debt. Rooke, the following expressions used:
“Despite the 14% drop on December 8, this is a wise move from a well-managed, capital-efficient business.”
Rooke: “The Investment Made Makes A Lot Of Sense”
On December 7, MicroStrategy announced its intention to lend investors $ 400 million and its plan to buy Bitcoin with the proceeds. MicroStrategy plans to buy Bitcoin this year 4. but the market has shown a strong negative reaction to MicroStrategy’s announcement for the first time. On December 8, micro strategy’s shares fell 14%, their biggest single-day drop since March 18.
Why the backlash? Because this time Bitcoin would be bought with other people’s money instead of the cash reserves found on MicroStrategy’s balance sheet. Despite the backlash, according to Rooke, this investment actually makes a lot of sense. MicroStrategy is a business that generates tens of millions of dollars in annual cash flow from operations, has virtually no long-term debt and has access to some of the world’s cheapest capital.
They also have a Bitcoin investment that has generated over 50% profit in a few months and continues, and this offer gives them the opportunity to almost double that investment.
How Much Can MicroStrategy Earn?
MicroStrategy has previously made 3 Bitcoin purchases. Rooke’s article describes the data as:
- They increased their August investment of $ 250 million by $ 152 million (61%),
- They increased their September investment of $ 175 million by $ 140 million (80%),
- They are roughly in profit even on December investments of about $ 50 million (made last week).
All together, a total of $ 475 million in cash reached $ 765 million in just a few months (a 61% increase).
With that $ 634.9 million in cash from investors, they can buy just over 35,000 Bitcoins. Since they already have 40,824 BTC, they will have more than 75,000 BTC by the end of December, along with the last BTC to arrive with this account.