MicroStrategy’s Huge Gamble on BTC

MicroStrategy is a data analytics company, founded by Michael Saylor (who has since handed over the CEO post to Phong Le). Saylor became an object of derision during the last bitcoin bear market for his huge gamble on BTC at a time when its price was plunging. Those who were tap dancing on his face then are now silent.

While MicroStrategy (MSTR) sells data analytics services and software, its real value has come from pumping all its spare cash – and plenty of borrowings – into BTC. Saylor wants MicroStrategy to be a $1 trillion company and has argued consistently and loudly for BTC as the only real, safe, store of value for the digital age.

Hence it is regarded as a cheaper entry to BTC than the many exchange-traded funds (ETFs) that have emerged in the last year. It’s also a way for institutional funds to grab a piece of bitcoin’s action without violating investment mandate restrictions on crypto assets – they are buying a listed stock, not bitcoin.

But, in truth, they are buying bitcoin.

The chart below tells the story. BTC emerged from its bear market and is now trading around $65,000, close to its all-time high. In September 2024, MSTR wrapped up a $1 billion offering of 0.625% convertible senior notes (paid semi-annually) which fall due in 2028. Part of the funds raised will be used to buy more BTC. The company already holds 245,000 BTC, currently worth more than $16 billion.

The idea of taking on more debt to buy BTC as part of your corporate treasury strategy is a tad too disco for most companies, but Saylor can’t buy enough of it. Every time the company announced plans to buy more BTC, the share price takes off. It shot up in the last few weeks after Saylor announced he wants to own 1 million BTC.

"The endgame is to be the leading bitcoin bank, or merchant bank, or you could call it a bitcoin finance company," said Saylor.

The strategy is not that bizarre. As ListedReserve points out, McDonalds’ strategy was to acquire the properties from which it sold burgers. It owns 70% of its buildings and 45% of the land leased to franchisees. Overall, the portfolio of land and buildings is worth in excess of $50 billion dollars.

“McDonalds has used this playbook for decades but with real estate,” said crypto analyst Willy Woo. “Make money to stack more prime commercial real estate worldwide.”