MicroStrategy’s substantial investment in Bitcoin has yielded impressive returns. However, this favorable situation is unlikely to persist. Once inexpensive financing becomes scarce, MicroStrategy’s stock value is likely to decline.
Other companies mimicking this strategy may face the same issues. Bitcoin enthusiasts should consider other options.
Since 2020, optimistic investors have, in effect, compensated MicroStrategy to build its BTC holdings. By issuing highly valued stock and borrowing at low costs, MicroStrategy has generated a compelling “Bitcoin yield” for its shareholders. The company’s strategy initiated a positive feedback loop, driving MicroStrategy’s stock, MSTR, to continually increase. Other firms—from pharmaceuticals to platforms competing with YouTube—are promoting similar treasury strategies.
Corporate Bitcoin treasuries serve as protection against inflation. They do not warrant the inflated stock valuations. The trend that propelled MicroStrategy’s shares upward will inevitably reverse. In 2025, investors should bypass MSTR in favor of direct exposure to spot BTC.
Saylor’s strategy
Initially a software company, MicroStrategy transitioned into a de facto Bitcoin hedge fund in 2020 when founder Michael Saylor began utilizing the company’s balance sheet to acquire BTC. Since that time, MicroStrategy has invested nearly $23.5 billion in Bitcoin. It currently possesses over 400,000 BTC, accounting for approximately 2% of the total Bitcoin supply, according to MSTR tracker data.
Saylor’s gamble has proven successful. As of December 7, the data indicates that MicroStrategy’s Bitcoin treasury is valued at more than $40 billion, reflecting unrealized profits of roughly $16.5 billion. This translates to a greater than 70% return on invested capital.
MicroStrategy’s stock performance has been even more impressive. Since 2020, MSTR has surged about 2,500%, outperforming nearly all significant public companies except Nvidia. This year has been particularly strong. As of December 7, MSTR has risen almost 600% year-to-date, surpassing BTC’s 125% gains.
MSTR is currently priced at $400 per share, resulting in a market valuation exceeding $90 billion. This pricing reflects a more than 2x premium over the value of the company’s Bitcoin holdings.
One should not credit MicroStrategy’s traditional software business, which reported a loss of $18.5 million in the third quarter. Instead, one should focus on the “shareholder value that MSTR has been creating through its treasury operations, i.e., its repeated tapping of the capital markets to raise proceeds to fuel the addition of Bitcoin to its sizable holdings,” stated Benchmark stock analyst Mark Palmer in a November research note.
Investors are eager for more. Since August, exchange-traded funds (ETFs) showcasing leveraged exposure to MSTR have accumulated over $4.5 billion in assets under management (AUM). On November 29, Solv, a decentralized finance (DeFi) protocol, announced its intention to launch an “onchain MicroStrategy.”
At the same time, other corporations are emulating MicroStrategy’s model. These include pharmaceutical company Hoth Therapeutics, AI developer Genius Group, and the YouTube alternative Rumble. Even major players like Microsoft are showing interest, and Elon Musk’s Tesla has already invested nearly $1 billion in BTC.
As of December 7, corporate treasuries collectively hold over $52 billion in BTC, according to Bitcointreasuries.net.
MicroStrategy is reaffirming its commitment. In August, the company introduced a distinctive performance metric: Bitcoin yield, measuring the ratio of BTC holdings to outstanding shares. It uses BTC-per-share as a benchmark for corporate performance.
In October, MicroStrategy unveiled plans to secure $21 billion in equity and another $21 billion in debt to support a multibillion-dollar Bitcoin acquisition strategy referred to as the “21/21 Plan.” The objective is clear. MicroStrategy seeks to boost “MSTR’s BTC Yield for each of the next three years from 4%–6% to 6%–10%,” according to Palmer.
Investing $42 billion in BTC is an easy decision for Saylor. He predicts BTC will reach $13 million by 2045, regarding $3 million as a “bear case.” Nevertheless, MicroStrategy’s approach has faced significant criticism, as noted by Palmer.
For those questioning why anyone would purchase its shares instead of simply acquiring Bitcoin, management has countered the criticism by pointing to the results,” Palmer remarked, referring to MSTR’s impressive performance since 2020. However, those results can change.
Prepare for a reversal
In November, MicroStrategy raised $3 billion through convertible notes to finance additional BTC purchases. This was the initial significant step in the 21/21 Plan. The terms of the deal were favorable, as MicroStrategy effectively borrowed at a 0% APR.
Investors have the option to convert notes into MSTR stock—but only at a set price of $672.40 per share, which is approximately 70% higher than MSTR’s trading price on December 7.
There is one important consideration. If MSTR fails to reach that price by June 1, 2028, noteholders can request cash repayment. Other MicroStrategy notes have similar conditions, leading to a total of at least $2 billion in debt. A liquidity crisis is almost unavoidable.
If the noteholders request redemptions, MicroStrategy may need to refinance (likely under less advantageous conditions) or liquidate Bitcoin. This action would create significant turbulence in the cryptocurrency markets. MicroStrategy holds the largest corporate Bitcoin stash worldwide. In either scenario, the ongoing premium MSTR has in relation to its Bitcoin reserves could disappear in an instant. This would undermine MicroStrategy’s narrative of “Bitcoin yield.”
MSTR has declined nearly 25% from its peak of around $543 per share on November 21. Should MicroStrategy’s premium disappear entirely, MSTR could fall below $170 per share. This assumes that Bitcoin’s price remains stable. However, market downturns could push the share price even lower.
For most investors, standard spot Bitcoin exposure—including ETFs like BlackRock’s iShares Bitcoin Trust ETF—offers plenty of volatility. If you’re an enthusiastic Bitcoin supporter like Saylor, then feel free to invest heavily in MSTR. More risk-averse investors should steer clear.
MicroStrategy’s Bitcoin purchases have generated over $17 billion in unrealized profits, based on data from MSTR Tracker.
Once a software company, MicroStrategy has acquired over $23 billion worth of Bitcoin since 2020 as part of founder Michael Saylor’s unconventional approach to corporate treasury management, according to data from MSTR Tracker.
These investments have yielded significant returns. On December 4, Bitcoin’s price exceeded $100,000 per coin for the first time, resulting in MicroStrategy’s Bitcoin treasury being valued at over $40 billion.
Outstanding stock performance
MicroStrategy’s stock has outperformed Bitcoin’s spot price even more significantly. Year-to-date, MSTR shares have surged over 475%, surpassing nearly every stock within the S&P 500, as indicated by data from Google Finance and Slickcharts.
As of December 5, MSTR had a market capitalization of approximately $92 billion, which is more than double the value of the company’s Bitcoin assets.
Analysts predict that the stock will continue to climb as MicroStrategy increases its Bitcoin acquisition efforts. As of December 5, the company retains around 400,000 BTC according to MSTR Tracker.
On November 25, Benchmark fintech analyst Mark Palmer informed Cointelegraph that he had raised his price target for MSTR from $450 to $650 per share. The stock is currently trading around $394 per share, based on data from Google Finance.
Continued Bitcoin acquisitions
During its earnings call on August 1, MicroStrategy reaffirmed its commitment to purchasing Bitcoin by introducing a distinctive performance metric: Bitcoin yield.
Bitcoin yield calculates the ratio of BTC holdings to outstanding shares and effectively establishes Bitcoin per share as a benchmark for corporate performance.
On October 30, the company revealed intentions to raise $21 billion in equity and an additional $21 billion in debt to support a multiyear, multibillion-dollar Bitcoin purchasing initiative referred to as the “21/21 Plan.”
MicroStrategy’s unconventional strategy has garnered numerous detractors, yet its substantial influence on the company’s stock price has provided ample validation, as MSTR has outperformed nearly all significant companies in the US over the past four-plus years, according to Palmer.
MicroStrategy anticipated entry into the Nasdaq 100
Bloomberg Intelligence predicts that MicroStrategy’s stock, MSTR, will be added to the Nasdaq 100 index later this month, with an announcement expected as soon as this week.
MicroStrategy (MSTR) is anticipated to be included in the Nasdaq 100 stock index on December 23, with an announcement likely coming shortly, as noted by Bloomberg Intelligence analyst Eric Balchunas in a post on the X platform.
This inclusion will rank MicroStrategy, a software company that transformed into an effective Bitcoin hedge fund in 2020, among the 100 largest stocks by market capitalization on the Nasdaq exchange.
It will also expose MSTR to hundreds of billions of dollars in institutional capital linked to the widely followed index.
MicroStrategy is likely to account for a 0.47% weight (the 40th largest holding). According to Balchunas on December 10, there are $550 billion in ETFs tracking the index.
For example, being part of the Nasdaq 100 will integrate MSTR into the Invesco QQQ Trust (QQQ), an ETF with around $322 billion in assets under management (AUM).
“$MSTR is expected to be incorporated into $QQQ on December 23 (with an announcement on December 13). Moderna is likely to be removed (symbolically),” Balchunas stated.
Moderna is a biotech firm that developed vaccines against the COVID-19 virus.
Balchunas also mentioned that MSTR is likely to join the S&P 500, the most widely-followed stock index, in 2025.
Bitcoin acquisition initiative
Since 2020, MicroStrategy has invested roughly $25 billion in Bitcoin as part of a corporate treasury strategy driven by co-founder Michael Saylor.
This acquisition effort has produced over $17 billion in unrealized profits, according to MSTR Tracker data. Currently, MicroStrategy owns nearly 425,000 BTC valued at over $42 billion, according to the data.
The strategy has proven successful as Bitcoin prices steadily rose, surpassing $100,000 per coin in December.
Since 2020, MSTR has risen by around 2,500%, surpassing nearly every major public company except Nvidia.
Currently, the stock trades at a premium of more than 2x its BTC treasury value. Analyst Mark Palmer from Benchmark Research suggests that the stock might keep climbing as MicroStrategy intensifies its Bitcoin purchases.
MicroStrategy, which primarily focuses on software and is led by Michael Saylor, holds the largest amount of Bitcoin among corporate entities. Below, we review how much Bitcoin MicroStrategy possesses and the significance of its investment strategy.
Introduction
In discussions surrounding the mainstream adoption of cryptocurrency, MicroStrategy has emerged as a trailblazer, using Bitcoin not merely as a digital currency but as a key element of its treasury management approach. The company’s strategic perspective on investing in Bitcoin has gained greater importance following the SEC’s approval of Bitcoin ETFs, including applications from major firms such as BlackRock and Fidelity. This landmark ruling is likely to attract considerable institutional capital into Bitcoin, potentially increasing its overall market capitalization significantly.
Moreover, the forthcoming Bitcoin halving in 2024 is expected to affect Bitcoin’s value by halving the block reward, which may create greater scarcity and lead to price increases. These trends highlight MicroStrategy’s proactive stance in utilizing Bitcoin within its treasury management practices, demonstrating the increasing acceptance of Bitcoin as a valid asset class in institutional circles.
This article delves into the detailed history of MicroStrategy’s Bitcoin purchases, offering insights into its acquisition strategy and the foresight driving these decisions.
What Is Microstrategy (MSTR)?
MicroStrategy (MSTR) is a vendor of enterprise business intelligence (BI) software recognized for its all-encompassing platform that aids businesses in making data-informed decisions and improving operational processes. The company provides a range of tools and features, including interactive dashboards, scorecards, ad hoc querying, automated report distribution, and highly formatted reporting. By aiming to boost efficiency and productivity, MicroStrategy incorporates AI and BI analytics, offering solutions like HyperIntelligence for real-time, integrated analytics. Founded in 1989 by Michael J. Saylor, MicroStrategy has positioned itself as a significant player in the business intelligence and analytics field, catering to a wide array of industries by helping them harness data for strategic choices.
Michael Saylor, the Executive Chairman of MicroStrategy, is a notable supporter of Bitcoin, regarding it as a better long-term investment compared to traditional currencies, owing to its decentralized and digital characteristics. Saylor’s optimistic view on Bitcoin is evident in his assertive investment approach for MicroStrategy, resulting in one of the largest corporate Bitcoin portfolios globally.
He has made several predictions regarding price points in the past, proposing that Bitcoin could reach extraordinary figures as it gains broader acceptance and is recognized as a digital store of value. However, his specific price expectations have shifted over time. According to his most recent forecasts, Saylor anticipates Bitcoin will hit $44,000 by the end of 2024 and ascend to $100,000 by 2025.
Recently, MicroStrategy has unveiled MicroStrategy AI, a significant enhancement to its AI/BI platform aimed at enabling businesses to integrate transformative AI solutions into their products and applications, all based on reliable data. This innovative addition seeks to change how organizations interpret data and engage with insights, simplifying, accelerating, and broadening access to data analysis throughout the company. It represents a major advancement for MicroStrategy in establishing itself at the forefront of AI and BI in the cloud, utilizing large language models (LLMs) and generative AI to increase employee productivity and organizational effectiveness.
MicroStrategy’s Bitcoin Adoption Journey
MicroStrategy (MSTR) gained attention in August 2020 when it unveiled its first Bitcoin purchase, highlighting the digital asset as a trustworthy store of value and a compelling investment option with greater long-term growth potential than holding cash. This initiative was not merely a one-time purchase but signified the commencement of a systematic investment strategy in Bitcoin.
MicroStrategy’s venture into Bitcoin started in August 2020, when it revealed the acquisition of 21,454 BTC for around $250 million. This initial investment marked a crucial shift in the company’s treasury management tactics, emphasizing Bitcoin’s capability as a safeguard against inflation and as an appealing store of value. Since then, MicroStrategy has continued to expand its Bitcoin holdings through various acquisitions, frequently coinciding with market downturns, demonstrating a strong belief in Bitcoin’s long-term value.
As of March 2024, MicroStrategy holds a total of 205,000 BTC, acquired at a cumulative cost exceeding $6.9 billion, realizing an unrealized profit surpassing $8 billion. This positions the company as the largest publicly traded holder of Bitcoin globally. By employing this bold accumulation strategy, MicroStrategy has established itself as a leader in the corporate embrace of Bitcoin.
Moreover, MicroStrategy intends to conduct a private offering of $600 million in convertible senior notes maturing in 2030, aimed at qualified institutional buyers in compliance with Rule 144A of the Securities Act. The offering includes a provision allowing initial purchasers to buy an extra $90 million in principal amount of notes during a 13-day window, with the notes providing options for conversion into cash or MicroStrategy’s class A common stock.
After this announcement, the stock price of MicroStrategy, MSTR, jumped by nearly 24%, reaching $1,334 per share, which is its highest level in almost twenty years. Since MicroStrategy began incorporating Bitcoin into its corporate reserves in August 2020, its stock has experienced a remarkable increase of 809%.
MicroStrategy’s Net Worth Evaluation and the Influence of Bitcoin
Although the net worth of MicroStrategy is shaped by its core business activities, it has become increasingly linked to the volatile value of its Bitcoin assets. As the price of Bitcoin has seen substantial fluctuations, so too has the market value of MicroStrategy. We will refrain from providing a real-time net worth figure due to Bitcoin’s price variability but will explain the process for calculating it.
To offer context, we will assess the return on investment (ROI) of Bitcoin in comparison with a conventional investment benchmark, the S&P 500, for the same duration. Assuming MicroStrategy initiated its Bitcoin investments in August 2020, Bitcoin has undergone drastic price changes, with notable highs and lows. Despite this volatility, Bitcoin’s overall upward trajectory has outperformed several traditional investments, including the S&P 500, during the same period.
What Drives MicroStrategy’s Ongoing Bitcoin Purchases?
MicroStrategy’s ongoing investment in Bitcoin, led by CEO Michael Saylor, stems from a conviction that Bitcoin serves as the ultimate long-term store of value, surpassing even gold. The company perceives Bitcoin’s limited supply of 21 million coins as a significant advantage, ensuring its scarcity and potential for value growth as demand escalates. This limited supply, along with Bitcoin’s potential for global adoption, positions it as an effective hedge against inflation, unlike fiat currencies that can be printed freely by governments. The digital nature of Bitcoin allows for efficient transfer of energy across time and space, further emphasizing its utility and prospects for widespread acceptance.
Michael Saylor describes Bitcoin as a “cyber-economy” rooted in truth and thermodynamics, positing that, in contrast to commodities, where increased value leads to heightened production, Bitcoin’s fixed supply directs human creativity towards value creation instead of inflationary expansion. This viewpoint is part of a wider investment strategy that regards Bitcoin as the most effective means of storing and transmitting value over time and space, potentially paving the way for its widespread adoption that benefits society. MicroStrategy’s assertive investment in Bitcoin represents a speculative wager on this adoption process, aligning with historical trends in the embrace of new technologies.
In Summary
MicroStrategy’s entry into Bitcoin marks a pivotal moment in corporate investment strategies relating to digital assets. By capitalizing on Bitcoin’s promise as a store of value and investment tool, MicroStrategy aims to enhance its treasury management while positioning itself at the leading edge of a financial transformation. As the crypto market continues to expand and gain greater mainstream traction, MicroStrategy’s Bitcoin holdings and acquisition history will undoubtedly serve as an important case study for corporations globally.
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