Lingham: MicroStrategy Debt Could Force Bitcoin Sales

Vinny Lingham, co-founder of Praxos Capital, revisited a prediction from October 2024 in a June 25 interview, saying Michael Saylor’s actions could harm bitcoin more than FTX. He noted MicroStrategy’s shares have fallen more than 80% from a 2021 peak of $473.83 to roughly $90.70 this week.

Lingham outlined the company’s outstanding convertible notes, which total about $6.7 billion. The notes include put rights that allow holders to demand cash repayment at par if the notes are not converted or refinanced.

An analyst estimate cited during the interview indicated that covering the first three note maturities through June 2028 could require selling roughly 74,000 bitcoin if bitcoin trades near $60,700. The full schedule of maturities could require about 111,000 bitcoin under the same price assumption.

MicroStrategy recently sold 2.7 million common shares to raise $335 million and used roughly $300 million to increase cash to about $1.4 billion. Lingham said that cash would cover preferred dividend obligations for about 10 months. The company also moved to bimonthly dividend payments, which Lingham said shortens management’s time to respond to deteriorating conditions.

Lingham described the company’s capital structure as complex, with multiple series of preferred shares including classes known as STRC, STRD and STRK. He noted STRC closed at $75.69 on June 25 and expressed skepticism that it will return to its $100 par value. “I don’t believe STRC ever returns to $100. I’d bet it never trades back at par again,” he said.

He described how aggressive bitcoin accumulation previously amplified the company’s market value and allowed further equity issuance to buy more bitcoin. He warned the process could run in reverse once MicroStrategy stops being a major buyer: “Once Strategy stops being the biggest buyer of bitcoin, selling pressure starts outweighing buying pressure. Liquidity disappears. The largest source of demand is gone.”

Lingham used a chess metaphor, saying the company faces a position where every available move creates trade-offs. He recommended stopping bitcoin purchases, halting new equity issuance and conserving cash while waiting for market conditions to improve, and added he does not expect the company to follow that path.

The firm faces maturing notes, preferred dividend schedules and limited cash reserves. How the company addresses refinancings, repayments or potential asset sales will determine whether it needs to liquidate bitcoin holdings to meet obligations.