In early 2020, when most companies were having challenges due to COVID 19, US listed company MicroStrategy (Nasdaq: MSTR) had a different problem, they had too much money. They were sitting on over USD 500 million, a cash pile that was growing day by day as lucrative subscription revenues were pouring into the Company. What to do?
Their CEO, Michael Saylor, considered this during COVID lockdown and during that time he came across Bitcoin…and he did extensive research. Michael came to the conclusion that the USD was being devalued before his very eyes…’it is a melting iceberg’ and that Bitcoin on the other hand is a deflationary asset that is increasing in value. He hatched a plan.
He thought, I will give half the USD 500m back to shareholders through a share buyback and the other half I will invest in Bitcoin. In fact I will make Bitcoin our Treasury Asset.
After educating his Board, Executives, Shareholders and Regulators he put the plan into action on 11 August 2020 with simultaneous announcements about the USD 250m share buyback and the USD 250m Bitcoin purchase.
The shareholders loved the Bitcoin plan so much that they only bought back USD 60m worth of stock, this left ~USD 200m still sitting in USD, which the Company then added to it’s Bitcoin strategy. In short the Company had invested USD 450m into Bitcoin. The first public company in history to do so at this scale.
But then, if that was not enough, the Company on 7 December 2020 announced a Convertible Note issuance of USD 400m, the full proceeds of which would be used to buy Bitcoin. The note matures in 2025 with a coupon of 0.75%. Upon maturity the note will convert to USD or stock in the Company or a combination at the discretion of the Company. Investors loved this idea so much that it was heavily oversubscribed and eventually closed at USD 650m…all of which (net fees) was invested into Bitcoin.
So in summary MicroStrategy now owns 70,470 Bitcoins purchased for USD 1.125bn at an average cost of USD 15,964/Bitcoin. Currently the value of these coins is up 123% at USD 5.5bn.
Since these transactions and the announcement of Bitcoin as a Treasury Asset Michael Saylor has been spreading the Bitcoin word via a number of podcasts. He has now established a 2 day seminar called Bitcoin for Corporations where he will share his ‘play book’ with attendees. The seminar is on 3-4 February and the agenda can be found here.
This whole MicroStrategy thing is only just starting, many other corporations will be now looking at doing the same thing…2021 is going to be a very interesting year…