Bitcoin
Michael Saylor reveals why MicroStrategy buys BTC
In a recent revelation, Michael Saylor, founder of MicroStrategy, detailed the bold strategy that led his company to become the first public company to invest heavily in Bitcoin (BTC). Speaking about the decision, Saylor highlighted the initial purchase of Bitcoin for $250 million in August 2020. This move was seen as an unprecedented change in the corporate world.
Michael Saylor Opens Up MicroStrategy’s Bitcoin Investment
The founder of MicroStrategy considered Bitcoin the “solution to the problem of 8 billion people”. Furthermore, he added: “It is the greatest innovation in money or property rights in the history of the human race. It’s like fire or electricity, it’s this new monetary protocol that will elevate humanity to new levels.”
Furthermore, Saylor highlighted that the change was initiated by MicroStrategy out of “desperation”. In a recent interview with The Iced Coffee Hour, he revealed that acquiring Bitcoin was the final decision to avoid closing the company.
However, Saylor admitted concerns about Bitcoin’s notorious volatility, fearing that significant drops could alarm shareholders and trigger legal challenges. Therefore, to mitigate these risks, MicroStrategy combined its Bitcoin acquisition with a $250 million premium share buyback structured like a Dutch auction.
Furthermore, this maneuver allowed shareholders who opposed the Bitcoin strategy to walk away with a premium, thus realigning the shareholder base to include only pro-Bitcoin investors. Surprisingly, only $60 million worth of shares were offered, leaving $175 million available for future Bitcoin purchases.
Consequently, Microstrategy
increased its Bitcoin holdings to $425 million. This decisive action positioned MicroStrategy as a pioneer, as no other public company has invested more than a few million dollars in Bitcoin. As the news spread, MicroStrategy declared Bitcoin as its main treasury reserve asset. In doing so, they challenged traditional approaches to capital allocation, such as investments in bonds or cash reserves.
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The move turned out to be a boon for MicroStrategy
The company’s share price doubled after this announcement, allowing it to raise an additional US$650 million. Within six months, MicroStrategy issued a 0% interest convertible debt offering, raising another billion dollars to invest in Bitcoin.
Additionally, the company’s aggressive Bitcoin acquisition strategy has caught the attention of other public companies. There was later news of Square and Tesla making their investments in Bitcoin. Despite the volatile market and regulatory uncertainties, including China’s bans on Bitcoin mining and trading, Saylor has remained steadfast in his belief in Bitcoin’s potential.
Furthermore, he argued that Bitcoin represents a revolutionary innovation in money and property rights. Over four years, MicroStrategy continued to raise funds through debt and equity offerings to expand its Bitcoin holdings. As of June 2024, the company had invested $7.5 billion in Bitcoin, with a market value fluctuating between $14 and $15 billion.
This bold strategy significantly increased the company’s market capitalization from $1 billion to $30 billion, and its enterprise value soared from $600 million to over $30 billion. Notably, MicroStrategy shares have outperformed major indices and technology giants, including Nvidia, Tesla, Amazon, and Apple.
Saylor concluded by acknowledging the emotional and financial rollercoaster of Bitcoin price fluctuations. At the same time, he also emphasized Bitcoin’s transformative impact on MicroStrategy’s fortunes. The company’s journey from a position of desperation to becoming a leader in corporate business Investing in bitcoins underlines a remarkable story of strategic innovation and resilience.
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