Michael Saylor’s unorthodox decision to hold bitcoin instead of cash at MicroStrategy has elevated the once-obscure software maker to the ranks of the largest corporations on Earth – in terms of cash held in treasury.
The company based in Tysons Corner, Virginia, has approximately US$26 billion in Bitcoin, a value greater than the cash (in dollars) of global market leaders such as IBM, Nike and Johnson & Johnson, according to data compiled by Bloomberg. Only 14 companies, led by Apple and Alphabet, have more than that.
In terms of market value, the US$26 billion is equivalent to more than a Banco do Brasil (US$25 billion). And a third of market cap from MicroStrategy itself – US$72 billion, which barely places it among the 200 largest companies in the USA.
Michael Saylor, co-founder and chairman, decided to invest in bitcoin in 2020 to protect cash against inflation while MicroStrategy’s revenue growth stagnated. Over time, it became the largest corporate holder of crypto – including issuing shares and taking out debt to acquire more bitcoin.
“Their balance sheet is basically a function of the price of Bitcoin,” said Dave Zion, founder of Zion Research Group, a firm based in Chadds Ford, Pennsylvania, that focuses on accounting and tax issues.
Shares of the most crypto-friendly company in the S&P 500 have soared 2,500% as Bitcoin has risen 700% since mid-2020. This has made MicroStrategy the best-performing large company in the US during the period.
Bitcoin operates at an all-time high, above US$90,000. “They don’t control the price of Bitcoin, so they’re just going to ride this wave, and it’s a wave that can go up or down,” says Zion.
Most corporate treasurers use a company’s financial assets to support the business or generate returns, including paying dividends. MicroStrategy’s Saylor argues that shareholders benefit from the buy & hold (buy and hold), even if the company does not pay dividends – it is worth noting that there is no payment of earnings in bitcoin, and the company has not sold crypto assets to compensate shareholders with cash.
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MicroStrategy created its own performance indicator called “bitcoin yield”. They divide their crypto reserves by the number of shares outstanding. According to this criterion, the accumulated return for the year is 26.4%. It is much less than the 150% of bitcoin, because the amount of paper grew during the period.
Saylor doubled down on the strategy of selling shares and taking on debt to buy crypto, saying the company aims to raise $42 billion over the next three years. The company’s total Bitcoin reserves were acquired for an aggregate purchase price of $11.9 billion — less than half the current value.
This strategy of accumulating and holding bitcoin has no end in sight, according to Mark Palmer, an analyst at Benchmark Co., who has a “buy” recommendation for the stock.
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“Given the movement of Bitcoin in 2024 in particular, there is really no reason for the company to deviate from this approach,” he said.
TD Cowen analyst Lance Vitanza also sees the market as receptive to MicroStrategy’s approach as the company continues to have good access to capital markets, he wrote in a note to clients on Monday.
“What began as a defensive strategy to protect cash became an opportunistic strategy aimed at accelerating shareholder value creation,” said Vitanza, who also has a “buy” rating on the stock. “This recurring value creation deserves to be capitalized on.”
By Monique Mulima, with information from Alexandre Versignassi, from InvestNews
