Bitcoin ‘Maximalist’ Saylor Makes Crypto His Only Job
Michael Saylor, Chairman and CEO of MicroStrategy, speaks during a panel discussion on Bitcoin … [+]
Michael Saylor’s new job is a lot like his old job: adding bitcoin to the balance sheet of his business software company with religious fervor.
“I’m a bitcoin maximalist, I happen to believe that bitcoin is an instrument of economic empowerment, it will benefit eight billion people,” Saylor said Forbes in an interview. “I also think that bitcoin is unique,” he continues, because of “its immaculate conception, its decentralization and its commodity status. All of those things make it the superior asset in the space.”
The Immaculate Conception he believes is the founding of bitcoin, as explained in a 2008 white paper by one or more people using the name Satoshi Nakamoto. Saylor stated that bitcoin is the only cryptoasset that is truly decentralized and without an issuer. He supports bitcoin as a corporate investment in part because he believes there is regulatory consensus among US regulators that bitcoin is a commodity and falls under the Commodity Futures Trading Commission’s jurisdiction. There is debate as to whether various other cryptocurrencies are securities and thus fall under the Security and Exchange Commission’s purview, as the agency has stated.
“The vast majority of the other cryptos are unregistered securities,” Saylor said. “They have an issuer, they want to pass the Howey test, and so if you’re going to invest in an equity instrument, you’re really a venture capitalist. We don’t invest as venture capitalists, we don’t want to take that kind of risk. In addition to the technical risk , the competition risk, you also have regulatory risk, the uncertainty of not knowing how they will be treated.”
Saylor has turned the analytics business he founded into a leveraged bet on bitcoin, with a stash worth about $1.9 billion and total debt of $2.7 billion. For Microstrategy’s first bitcoin purchase in 2020, the company used $250 million of its capital to buy the cryptocurrency. The company then borrowed $2.4 billion and sold $1 billion in equity to fund its subsequent bitcoin investments.
The concept has been good for Microstrategy’s share price, up 159% to $319 a share since bitcoin buying began in 2020, but down 60% from the peak of $816 it hit when the crypto hit its all-time high on November 10. the bitcoin strategy has done nothing for the bottom line; the last net result Microstrategy recorded was in Q3 2020.
Last week, the company posted a loss of $1.06 billion for the second quarter, mainly related to a loss of $918 million on its crypto holdings. Yet, unlike the car manufacturer Tesla
He must be fine with the switch. The company’s founder controls 68% of the votes through his Class B shares, although he only holds 4% of the publicly traded Class A, according to Microstrategy’s April proxy statement.
Before taking the crypto plunge, Microstrategy shares had averaged about 13% annual returns since going public in 1998, nearly double the Standard & Poor’s 500. The company’s software helps clients collect and manage data related to their businesses, but its annual revenues plateaued between $500-$600 million over the past decade. In addition, Microstrategy struggled to grow in a market full of larger rivals such as Microsoft
“In the 2017 time frame, we decided we were going to spend a lot more money to grow, and we channeled hundreds of millions of dollars into sales and marketing and growth initiatives,” says Saylor. “What we found is that it doesn’t matter how much money you spend, it doesn’t move the needle.”
To save his business, Saylor felt Microstrategy had to take a risk. He chose to go for crypto gold.
The software business remains profitable and has brought in $22 million in net cash from operations over the past six months. However, this number is down from $76 million in the same period in 2021. Expanding the software operation is now Le’s job.
Bitcoins
Little light was shed on the economy during the company’s quarterly earnings report. For the question-and-answer session, Shirish Jajodia, Microstrategy’s director of investor relations, read out questions from named analysts, an unusual format.
While the financial benefits may be questionable, the bitcoin game has certainly launched Microstrategy – and Saylor – into the public eye. His bitcoin-focused Twitter account has amassed 2.6 million followers, and he regularly appears in the media to speak as an advocate for the native cryptocurrency.
“Nobody wants to talk about business intelligence. If I were to tweet nonstop about business intelligence, that engagement would drop dramatically, because the average person is not buying enterprise business intelligence software,” Saylor said. “The average person is concerned about macroeconomics, politics, digital assets, crypto freedom.”
In addition to growing his personal audience, Saylor stated that bitcoin is driving public engagement with Microstrategy. The company’s trading volume is also heavily influenced by investor interest in bitcoin.
“The majority of the enterprise value of the company can now be attributed to the bitcoin strategy,” says Saylor. “Bitcoin strategy doesn’t have a full-time employee. I represent bitcoin. It’s not a labor-intensive business or an activity-intensive business; it’s really a capital-intensive business.”
Since Microstrategy’s first bitcoin purchase in 2020, the company has channeled revenue from its software business into purchases, according to Saylor. In March, Microstrategy also took out a $205 million loan from crypto-focused Silvergate Bank to buy more bitcoin, using existing inventory as collateral. If bitcoin falls below $21,000 — it’s below $24,000 now — it could trigger a margin call, but Saylor has said the company’s borrowings are 10x
Beyond the financial benefit of the strategy itself, the company’s status as a way to get bitcoin exposure in a traditional financial market makes raising capital easier, “I don’t have to beg people to invest in MicroStrategy
