MicroStrategy’s founder and chairman Michael Saylor has experienced significant ups and downs over the last 25 years. In 2000, the dotcom bubble burst wiped out almost all of the company’s stock value. More recently, in 2022, Bitcoin, a substantial part of MicroStrategy’s balance sheet, dropped over 70% from its all-time high.
For the past quarter-century, MicroStrategy’s founder and Chairman, Michael Saylor, has navigated through various market fluctuations. The bursting of the dotcom bubble in the year 2000 resulted in a devastating loss, wiping out almost all of the company’s stock value, leaving just 1% of its initial worth. More recently, in 2022, Bitcoin, a substantial component of MicroStrategy’s financial holdings, underwent a sharp decline, dropping over 70% from its all-time high attained in November.
In March 2022, MicroStrategy (MSTR) experienced an impressive surge, with its stock price soaring by an astounding 461.7% compared to the previous year. Amidst all the volatility, this tech company has proven to be a profitable investment for its shareholders.
Who owns MicroStrategy?
MicroStrategy Inc. is a leading company that creates and offers business intelligence and mobile software solutions. Their product portfolio includes the MicroStrategy Analytics platform and MicroStrategy Server. MicroStrategy earns income through various means such as licensing agreements, subscriptions for cloud-based services, and associated professional services related to their platform.
Saylor holds the largest stake in MicroStrategy, valued at more than $2 billion from Class B shares, giving him approximately 68% voting power. Capital Research and Management Company and The Vanguard Group, Inc., follow as the second and third largest shareholders.
As a crypto investor holding a significant position in MicroStrategy, I’ve observed that between December and April, I sold approximately 400,000 of my voting shares. However, this sale hasn’t resulted in a substantial decrease in my overall stake within the company.
Big bet
As the chairman of MicroStrategy, Saylor’s approach centers around utilizing low-interest debt to secure significant financial resources. Given that annual interest rates hover below 1%, the company can affordably obtain capital, thereby amplifying the potential returns on investments.
As an analyst, I would describe it this way: MicroStrategy takes a creative approach to repaying debts by using its own stock (MSTR) instead of liquid cash. By offering lenders a premium over the initial stock price at issuance, we, MicroStrategy, gain several benefits. First, we conserve our cash reserves for operational needs and potential future investments. Second, this strategy aligns the interests of both parties: MicroStrategy’s success is directly linked to the stock’s performance, while lenders benefit from potential stock price appreciation.
I analyzed MicroStrategy’s financial moves in 2020 and identified a strategic approach to safeguard against currency debasement. To execute this plan, we raised approximately $3.4 billion using various financial instruments and allocated the excess funds towards purchasing Bitcoin. The total investment amounted to over $4 billion as the price continued to rise.
MicroStrategy’s plan is to redeem its fiat debt down the line by offloading fewer bitcoins, taking advantage of the digital currency’s role as a value-retaining asset with potential for significant price growth. In a tweet from October 2020, Saylor disclosed his personal ownership of 17,732 BTC valued at $250 million at the time. It’s reasonable to assume that he has purchased more since then.
I’ve been asked about the quantity of Bitcoin I possess. I personally hold 17,732 Bitcoins, which I acquired at an average price of $9,882 per coin. Prior to MicroStrategy’s decision to buy Bitcoin themselves, I disclosed these holdings to them.
— Michael Saylor⚡️ (@saylor) October 28, 2020
Long-term strategy
As a researcher studying MicroStrategy’s Bitcoin acquisitions, I’ve found that over the past four years, this company has amassed a significant holding of 214,246 Bitcoins. This equates to approximately 1.02% of the total circulating supply of Bitcoin. Notably, MicroStrategy initiated its most recent purchasing phase towards the end of December 2023, just before the latest bull run began.
Based on SEC filings, the company spent $155.4 million between February 15th and 25th to buy approximately 3,000 Bitcoin. Moreover, they acquired an additional 9,000 tokens using convertible notes worth $623 million during March 11th and 18th.
MicroStrategy Announces Pricing of Offering of Convertible Senior Notes $MSTR
— Michael Saylor⚡️ (@saylor) March 6, 2024
Approximately 25% of MicroStrategy’s overall Bitcoin buys in the year 2024 were spent at a price point higher than double the average cost from the previous year, based on Bloomberg’s collected data.
As a researcher studying the cryptocurrency market, I’ve discovered that my software company currently holds approximately 214,246 Bitcoins, valued at over $14 billion. This represents around 1% of the total circulating supply of Bitcoin. For quite some time, we’ve held the title of the largest Bitcoin holder among publicly traded companies. However, more recently, BlackRock has surpassed us by acquiring even greater Bitcoins holdings through its iShares Bitcoin ETF (IBIT).
It has come to light that BlackRock and Fidelity collectively manage Bitcoin holdings valued at approximately $27.7 billion through their Bitcoin spot Exchange-Traded Funds (ETFs). These ETFs currently oversee a total of 428,304 Bitcoins, which is significantly more than MicroStrategy’s current holding of 214,058 Bitcoins.
Does the strategy work in the long run?
The average cost MicroStrategy paid for Bitcoin, which is $31,554 per coin, has led to a market value exceeding $13 billion for their holdings. This represents a significant gain from their original investment.
Over the past two and a half years, starting from April 2019, Bitcoin prices have experienced remarkable growth, rising from $5,170 to approximately $66,500 at present. In contrast, over the past five years, MicroStrategy’s stock (MSTR) has delivered exceptional gains, yielding a return of around 910%, surpassing the broader market’s performance.
Despite a recent pullback for MicroStrategy’s shares, the company’s stock has experienced a significant gain of over 90% in 2024. Notably, it had already seen an impressive increase of approximately 346% in the previous year, 2023.
Despite the impressive revenue figure of approximately $496 million that MicroStrategy achieved in 2023, its operating income amounted to a mere $800,000 – a significant decrease from the previous year’s $11 million. Consequently, the company’s stock price seems inconsistent with its business performance.
As a researcher, I’ve observed that whatever business model proves effective, investors will embrace it. MicroStrategy, under Saylor’s leadership, has blazed a trail by integrating Bitcoin into their corporate treasuries, positioning the company for long-term prosperity. This trailblazing move showcases Bitcoin’s potential as a store of value and sets an example for other businesses to adopt this strategy. Consequently, broader adoption within the corporate sector is gaining momentum.
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2024-04-28 13:19