MicroStrategy margin call? BTC losses grow as MSTR board faces potential investor class action
15:47, 8 July 2022
Despite plunging Bitcoin (BTC) prices, which forced MicroStrategy (MSTR) to re-collateralise a loan last month in order to avoid a margin call, MicroStrategy stock has rebounded by over 50% since hitting a 52-week low share price on 13 June. Now, the business software company that is also the largest corporate Bitcoin holder faces a potential shareholder class action lawsuit alleging a breach of fiduciary duties.
MSTR CEO Saylor reports additional Bitcoin purchase - Photo: Twitter“Our investigation concerns whether the Company’s board of directors breached its fiduciary duties to shareholders and/or grossly mismanaged the Company,” said the law office of Frank Cruz in a statement. The potential lawsuit is seeking current MicroStrategy shareholders who purchased stock prior to the June 2000 board authorization for MicroStrategy to adopt its current Bitcoin treasury management strategy.
Despite concerns MicroStrategy would have to liquidate some of its Bitcoin holdings to cover a potential margin call from lender Silvergate Bank sent shares to a $152.19 52-week low last month, MicroStrategy stock has steadily gained, hitting a $233.50 intra-day high Friday, a 53.4% gain in under one month. MicroStrategy stock trades on the Nasdaq exchange under the ticker MSTR.
MicroStrategy Inc. (MSTR) stock price
Due to its holding roughly 130,000 bitcoin after purchasing an additional 480 bitcoin for $10m (£8.30m) at a $20.817 average price, MicroStrategy stock largely tracks the world’s largest cryptocurrency. As a result, MicroStrategy stock is roughly 80% off its $891.38 52-week high set last November, as bitcoin hit its $68,789 all-time high around the same time.
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MSTR vs BTC June 2020-YTD
MSTR (blue) vs BTC (red) June 2020-YTD - Photo: TradingView
Frivolous lawsuit?
As with MicroStrategy stock, Bitcoin has rebounded since its $17,789 52-week low to just over $22,230 Friday, a 25.4% gain. MicroStrategy has spent just under $4bn on its Bitcoin holdings, at a roughly $30,000 average price per bitcoin, MicroStrategy CEO Michael Saylor reported on Twitter.
Specifics of the potential lawsuit, however, are scarce. “Class action micht be coming for [MicroStrategy] against board for allowing purchases of Bitcoin,” opined Twitter account This is Good for Theocrats. “Actually, from reading this, they’re pretty vague about the misconduct. Time to go fishing.”
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