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MicroStrategy founder and chairman Michael Saylor has had his ups and downs over the past 25 years. First, the bursting of the dotcom bubble in 2000 wiped out a staggering 99% of the company’s stock market value. In 2022, Bitcoin, a significant part of MicroStrategy’s balance sheet, has crashed more than 70% from its November ATH.
Yet, as of March 2024, MicroStrategy (MSTR) has seen a staggering 461.7% increase in its stock price over the past year. Despite all the dramatic events, MicroStrategy has been a success story for its investors.
Who owns MicroStrategy?
MicroStrategy Inc. develops and provides enterprise mobility and analytics software, including the MicroStrategy Analytics Platform and MicroStrategy Server. The company generates revenue through licensing agreements, cloud-based subscriptions and associated services linked to its platform.
Saylor is MicroStrategy’s largest shareholder, with Class B holdings worth more than $2 billion, with 68% voting control. Capital Research and Management Company and The Vanguard Group, Inc. are the second and third largest shareholders.
Although Saylor sold 400,000 voting shares between December and April, his stake did not decline dramatically.
Big bet
Saylor’s strategy as chairman of MicroStrategy is to leverage low-cost debt to raise substantial funds. With interest rates below 1% per annum, the company accesses affordable capital, maximizing the impact of its investments.
MicroStrategy innovatively uses its stock (MSTR) for debt repayment rather than cash, providing lenders with a premium over the stock price at issuance. This approach benefits MicroStrategy and aligns interests with those of lenders.
In 2020, Saylor made the strategic decision to protect against currency depreciation by investing MicroStrategy’s available cash in Bitcoin. At that time, MicroStrategy raised $3.4 billion through various financial instruments to acquire Bitcoin, totaling $4 billion in purchases at increasing prices.
The idea is that MicroStrategy can pay off its fiat debt in the future by selling less Bitcoin, thereby exploiting Bitcoin’s potential as a store of value with long-term capital appreciation. In an October 2020 tweet, Saylor revealed that he personally held 17,732 BTC worth $250 million. Presumably he has acquired 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 latest buying spree, the company began purchasing Bitcoin in late December 2023, just before the last bull run.
According to SEC deposits, between February 15 and 25, the company invested $155.4 million to acquire 3,000 BTC. Between March 11 and 18, an additional 9,000 tokens were purchased for $623 million in convertible notes.
MicroStrategy spent nearly a quarter of its total Bitcoin purchases in 2024, with the average cost more than twice the average cost last year, according to data compiled by Bloomberg.
Today, the software company owns 214,246 BTC, valued at over $14 billion, or approximately 1% of the total circulating BTC supply. MicroStrategy has been the largest holder of Bitcoin among public companies for some time. However, recently, BlackRock has exceeds MicroStrategy’s holdings through its iShares Bitcoin ETF (IBIT).
Recently, it was revealed that BlackRock and Fidelity collectively held 428,304 BTC worth $27.7 billion through their spot Bitcoin ETFs. These ETFs hold 214,058 more Bitcoins than MicroStrategy.
Does the strategy work in the long term?
MicroStrategy’s average purchase price of $31,554 per BTC has resulted in a current market value of over $13 billion, representing a substantial return on their initial investment.
Since April 2019, BTC prices have risen from $5,170 to around $66,500 at the time of writing. Over the past five years, MicroStrategy (MSTR) stock has returned 910%, significantly outperforming the returns of the broader market.
Although MicroStrategy shares have retreated recently, the stock has surged more than 90% this year, following a remarkable 346% rise in 2023.
However, the company’s stock price is not in line with the company’s performance. In 2023, MicroStrategy’s business generated almost $496 million in revenue, while operating profit was only $800,000, down from $11 million in 2022.
Overall, whatever business model works, investors will like it. Saylor’s pioneering integration of Bitcoin into corporate treasuries positioned MicroStrategy on a path to long-term success and paved the way for other companies to follow suit. This strategy demonstrated Bitcoin’s potential to serve as a store of value and influenced broader adoption within the enterprise sector.
