(Bloomberg) — It’s the latest corporate strategy for companies from Tesla Inc. to Square Inc.: shift a portion of cash reserves into cryptocurrencies as digital assets become more mainstream.
Still, few have gone as far as MicroStrategy Inc. Eight months after its first investment, the software firm has a Bitcoin holding worth more than $5 billion.
Shares of MicroStrategy have rocketed almost 600% since mid-July, boosting the fortune of founder Michael Saylor, a billionaire until an accounting scandal in 2000. The chief executive officer is now worth $3 billion, according to the Bloomberg Billionaires Index, joining the ranks of the world’s richest crypto holders, a list that isn’t definitive since some fortunes can’t be identified or verified.
MicroStrategy’s crypto fixation began soon after the pandemic hit when the firm found it had a cash-flow problem: There was just too much of it. After cutting advertising and axing 400 jobs unsuited to home-work, the Tysons Corner, Virginia-based firm was sitting on a cash pile of $550 million with nowhere to put it. Saylor, 56, turned his attention to Bitcoin.
“People still aren’t sure: Are we crazy or are we not crazy?” Saylor said. “The only way to get economic security is to invest in scarce assets that are not going to be debased by the currency expansion. That is the environment that led us to decide we should consider Bitcoin as a treasury reserve asset.”
‘Every Scar’
Not everyone agrees with the strategy.
“Saylor equated Bitcoin to a bank – that’s just ridiculous,” said Marc Lichtenfeld, chief income strategist at the Oxford Club, a financial-research firm that has no stake in MicroStrategy. “When you put your money in a bank, the value of it doesn’t go up or down by 10% a day.”
Saylor has clashed with investors before. In 2000, a shareholder filed a class-action lawsuit against MicroStrategy, alleging it misled investors over the company’s earnings by booking revenue prematurely to inflate profits.
MicroStrategy agreed to restate its revenue figures and Saylor, once dubbed the wealthiest man in Washington, D.C., with a fortune of $7 billion, lost almost all of it in a matter of weeks after shares fell 95%. He and his fellow executives, without admitting or denying the allegations, paid $11 million to the Securities and Exchange Commission in December 2000, including $1 million in fines.
“It’s made us careful and humble and focused,” Saylor said. “Every scar informs you, and I wouldn’t be who I am without having lived through those experiences.”
Steady Revenue
Saylor has continued to run the analytics software business he founded in 1989, and has overseen annual revenue streams of around $500 million for the last decade, though sales have dipped in recent years.
Bitcoin’s price has soared in recent months, hitting a record above $58,000 last month as big investors pile in and the asset class matures.
Saylor shrugs off concern about Bitcoin’s volatility and said crypto critics are behind the curve. He said he’s also put his own money into the digital asset, amassing a personal holding worth more than $1 billion.
“If you go back 10 years, how many people agreed that Facebook, Google, Apple and Amazon would own the world?” he said. “Who were the last people to embrace this? Senior members of the establishment.”
Raise Debt
Saylor’s appetite to acquire Bitcoin didn’t stop after the company’s first purchase. When the majority of MicroStrategy’s cash reserves were exhausted, Saylor raised a $650 million corporate bond and used it to buy more.
Saylor said he’d rather issue debt against future cash flow now than save up to buy Bitcoin in five years, when he thinks it’ll be pricier.
In February, the company raised another $1.05 billion in a bonds-for-Bitcoin offering, and on March 5 it announced yet more purchases. On Friday, Saylor tweeted that MicroStrategy bought 262 additional Bitcoins for $15 million in cash, bringing the total to about 91,326. The firm’s shares closed down 2.5% to $784 in New York.
Read more: MicroStrategy CEO Will Consider Raising More Debt to Buy Bitcoin
The move has resulted in MicroStrategy becoming a dual-purpose company: part software maker, part Bitcoin investor. While the firm has been transparent about this change in regulatory disclosures, juggling two distinct goals isn’t something that investors are accustomed to.
“If you’re a hedge fund and you want to make that kind of a concentrated bet, you’re entitled to do that,” Lichtenfeld said, but “as a software company to make this kind of a bet is completely irresponsible.”
‘Critical Point’
Saylor said the company has been upfront with investors throughout. When MicroStrategy increased its Bitcoin holding, it held a Dutch auction to give shareholders time to sell their stock.
“Everybody had plenty of time to digest the news and decide whether they’re on or off,” Saylor said.
With all the attention he’s attracted, Saylor wants to do more than just defend a radical investment strategy. He’s become something of a global Bitcoin ambassador in recent months, appearing regularly on crypto podcasts and YouTube shows advocating for digital-asset investments.
“This is a really critical point in human history,” he said. “We’ll build a better world on it once people understand it. We’re still very early. This will be the decade.”
(Updates with additional purchases in 17th paragraph.)
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