Few tales in company finance are as audacious, bewildering, or downright entertaining as that of the corporate formerly known as MicroStrategy. This once-humdrum business-software vendor has remodeled right into a high-octane bitcoin funding automobile underneath the flamboyant management of Michael Saylor, its co-founder and government chair. The corporate, now called Strategy, holds nearly 500,000 bitcoins, equal to 2.38 per cent of the whole provide, acquired at a mean worth of round $66,000.
What captivates markets isn’t simply the size of Technique’s bitcoin accumulation however the relentless monetary engineering underpinning it. The newest manoeuvre is the announcement final week of a $21bn “at-the-market” (ATM) offering of STRK, a convertible perpetual most well-liked inventory at present yielding greater than 9 per cent (payable on the firm’s discretion in money or widespread inventory). The proceeds will likely be used, predictably, to purchase extra bitcoin.
At immediately’s bitcoin worth of round $80,000, Technique may amass one other 262,500 bitcoins, bringing its complete holdings to three.6 per cent of all bitcoin in existence. According to JPMorgan research, “MicroStrategy’s bitcoin purchases alone accounted for 28 per cent of final 12 months’s file capital influx into crypto markets.” It’s no exaggeration to say that Technique shouldn’t be merely a serious participant however the market itself — a blue whale consuming all of the out there krill within the bitcoin ocean.
This newest monetary feat follows scorching on the heels of a $42bn ATM issuance of widespread inventory and debt introduced on Halloween 2024 — a becoming date for a corporation that thrives on monetary trick-or-treating. On the time, Technique’s shares closed at $244.50. The election of Donald Trump despatched the inventory hovering, reaching an intraday peak of $543 on 20th November, nevertheless it has since fallen to half that degree. The rollercoaster journey has been white-knuckle stuff.
On the coronary heart of this bitcoin bonanza is an anomaly few funding companies can replicate: Technique’s inventory trades at a persistent premium to its internet asset worth. Most funding trusts struggle to avoid trading at a discount, typically inviting shareholder activism and stress to purchase again shares. Not so for Technique, whose inventory has commanded a premium as excessive as 3.8 occasions NAV, at present standing at round 1.7 occasions. This valuation anomaly has enabled the corporate to concern fairness and equity-linked devices aggressively, utilizing the proceeds to accumulate but extra bitcoin. It’s a self-reinforcing cycle that has cemented Technique’s standing as a Wall Avenue obsession (and massive investment banking fee-payer) and a bitcoin juggernaut.
But, therein lies the rub. Technique’s legacy software program enterprise doesn’t generate money. Servicing the excessive dividend on STRK would require additional monetary engineering, almost certainly by way of extra fairness issuance. This may inevitably result in dilution for current widespread stockholders. STRK, in impact, functions as a perpetual payment-in-kind instrument, mixed with an out-of-the-money name possibility — an elegantly convoluted mechanism primed for vital dilution.
Then there’s Saylor’s current post on X (previously Twitter):
$STRK whereas the iron is scorching.
— Michael Saylor⚡️ (@saylor) March 13, 2025
Saylor has a penchant for making grandiose public statements. This newest cheeky piece of (self-)promotion is eye-catching not only for its bravado however for its potential regulatory implications. Legally, an organization’s prospectus — replete with fastidiously lawyered threat components — is supposed to do all of the speaking. Public corporations usually are not imagined to hype their inventory choices, and Saylor has beforehand tread a really wonderful line by championing bitcoin quite than Technique inventory itself. This newest publish, nevertheless, is tougher to elucidate away.
The general public plea is all of the extra putting provided that again in 2001, Saylor had consented to a everlasting injunction towards violating antifraud provisions of US securities regulation to settle Securities and Change Fee costs of accounting fraud. (With out admitting wrongdoing, Saylor additionally paid $8.6mn in disgorgements and penalties.) This newest publish seems to depend on a extra relaxed strategy to regulatory enforcement underneath the brand new Trump administration.
In fact, if the worth of STRK declines, the plaintiffs’ bar will likely be desirous to pounce. However for now, Saylor appears content material to check boundaries.
Saylor’s brilliance doesn’t essentially lie in funding acumen however in his capacity to raise Technique’s share worth — up over twentyfold since its pivot to bitcoin in August 2020. This has enabled insiders to money in massively, with senior executives unloading $568mn of stock in 2024, together with a flurry of sales by Saylor’s lieutenants close to the height in November.
But it might be a mistake to conflate share worth efficiency (and C-suite enrichment) with funding efficiency. Since its shift to bitcoin four-and-a-half years in the past, Technique’s cumulative return on its bitcoin holdings is a modest 20 per cent, whereas bitcoin has soared by round eight occasions.
Saylor’s timing has been removed from impeccable. Between November 10 2024 and February 23 2025, in line with Investor’s Business Daily, “Technique spent $21.2bn shopping for bitcoin at a mean worth of $96,458.” The corporate buys excessive, not low, as a result of it points extra shares and convertibles when bitcoin is hovering. This, in flip, fuels pleasure round Technique’s inventory and drives up its premium to NAV. This behavior of shopping for excessive is a function, not a bug, of Technique’s strategy.
As for Saylor’s funding recommendation, on January 20 February 28 2025, he tweeted, “Promote your kidney in the event you should, however preserve the bitcoin.” Had one adopted that steering, the consequence can be a mark-to-market drop of 20 per cent in funding worth and a realised lack of a crucial organ.
Bitcoin might come again; an excised kidney is not going to. The broader query stays whether or not Technique’s relentless fundraising to purchase bitcoin is a masterstroke or a reckless gamble. The $1,000 per share conversion worth for STRK represents a wager on bitcoin’s continued ascent. If bitcoin soars, all stakeholders profit. If it stagnates or declines, the dilution from STRK and different fairness issuances will weigh closely on widespread shareholders, who’re already being pushed additional down the capital construction.
For now, Technique’s monetary wizardry is working. However the current correction in its share worth, the corporate’s capacity to craft novel securities and appeal to new consumers has helped maintain bitcoin’s rise — or, extra not too long ago, mood its fall — reinforcing a suggestions loop that retains the sport going.
However how lengthy can it final? Technique’s success is dependent upon two crucial components: the continued premium of its inventory to NAV and the continued appreciation of bitcoin. If both falters, your complete edifice dangers collapse. Within the meantime, Saylor and his workforce will presumably proceed issuing fairness and equity-linked securities, accumulating bitcoin, exhorting the US government to buy 20 per cent of total bitcoin supply, and selling their own Strategy shares at periodic intervals.
Saylor’s X publish sums up Technique’s technique: strike the iron whereas it’s scorching. The query is whether or not administration’s hyper-opportunism belies the arrogance they so typically profess.
Additional studying:
— If bitcoin is the future, what explains MicroStrategy’s need for speed? (FTAV)
— MicroStrategy’s secret sauce is volatility, not bitcoin (FTAV)
— Examining MicroStrategy’s record-shattering $21bn ATM (FTAV)
Correction: an earlier model of the publish had the date mistaken for Saylor’s “kidney” tweet.
