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Michael Saylor, founder and chairman of MicroStrategy, has experienced ups and downs over the past 25 years. First, the bursting of the dotcom bubble in 2000 wiped out 99% of the company's stock value. In 2022, Bitcoin, which is a key part of MicroStrategy's balance sheet, has plunged more than 70% from its November ATH.
However, in March 2024, MicroStrategy (MSTR) stock was up an impressive 461.7% over the past year. Despite all the drama, MicroStrategy has been a success story for investors.
Who owns MicroStrategy?
MicroStrategy Inc. develops and provides enterprise analytics and mobility software, including the MicroStrategy Analytics platform and MicroStrategy Server. The company generates revenue through licensing agreements, cloud-based subscriptions, and related services associated with its platform.
Saylor is MicroStrategy's largest shareholder, owning more than $2 billion in Class B stock and controlling 68% of the voting power. Capital Research and Management Company and The Vanguard Group, Inc. are the second and third largest shareholders.
Saylor sold 400,000 voting shares between December and April, but his holdings have not decreased dramatically.
big bet
Mr. Thaler's strategy as MicroStrategy's chairman revolves around leveraging low-cost debt to raise significant capital. With interest rates of less than 1% per year, the company has access to affordable financing and can maximize the return on its investment.
MicroStrategy innovatively uses its own stock (MSTR) instead of cash to repay debt, providing lenders with a premium over the stock price at issuance. This approach benefits MicroStrategy and aligns its interests with lenders.
In 2020, Saylor made a strategic decision to protect himself from currency depreciation by investing MicroStrategy's surplus funds in Bitcoin. Around that time, MicroStrategy raised $3.4 billion through various financial instruments to acquire Bitcoin, resulting in a total purchase of $4 billion due to rising prices.
The idea is that MicroStrategy can reduce its Bitcoin sales and leverage Bitcoin's potential as a store of value through long-term capital appreciation to repay its statutory obligations in the future. In an October 2020 tweet, Saylor revealed that he personally holds 17,732 BTC worth $250 million. It's safe to assume he's gained even more since then.
long term strategy
Over the past four years, MicroStrategy has acquired 214,246 BTC, representing approximately 1.02% of the total supply. In its most recent buyout, the company began purchasing Bitcoin in late December 2023, just before the recent bull run.
According to the SEC Documents to be submitted, between February 15th and 25th, the company invested $155.4 million and acquired 3,000 BTC. From March 11th to March 18th, an additional 9,000 tokens were purchased with $623 million in convertible notes.
According to MicroStrategy, it will spend nearly a quarter of its total Bitcoin purchases in 2024, with the average cost more than double last year's average cost. data Compiled by Bloomberg.
Currently, the software company owns 214,246 BTC, worth more than $14 billion. This represents about 1% of his total BTC supply in circulation. MicroStrategy has been the largest Bitcoin holder among publicly traded companies for quite some time. However, recently, BlackRock has Beyond Owned through MicroStrategy's iShares Bitcoin ETF (IBIT).
It was recently revealed that BlackRock and Fidelity jointly own 428,304 BTC worth $27.7 billion through the Spot Bitcoin ETF. These ETFs hold 214,058 bits more Bitcoin than MicroStrategy.
Will that strategy work in the long run?
MicroStrategy's average purchase price was $31,554 per BTC, giving it a current market value of over $13 billion, representing a substantial return on its initial investment.
Since April 2019, BTC price has increased from $5,170 to around $66,500 at the time of writing. Over the past five years, MicroStrategy stock (MSTR) has returned 910%, significantly outperforming the overall market return.
MicroStrategy stock has fallen recently, but is up more than 90% this year, following an impressive 346% gain in 2023.
However, the company's stock price is not linked to its business performance. In 2023, MicroStrategy's business generated nearly $496 million in revenue, but operating income fell from $11 million to just $800,000 in 2022.
Overall, investors will like whatever business model works. Saylor's pioneering integration of Bitcoin into corporate finance has led to long-term success for MicroStrategy and paved the way for other companies to follow. This strategy demonstrated Bitcoin's potential to act as a store of value and inspired widespread adoption within the corporate sector.
