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 reworked right into a high-octane bitcoin funding automobile below the flamboyant management of Michael Saylor, its co-founder and govt chair. The corporate, now called Strategy, holds nearly 500,000 bitcoins, equal to 2.38 per cent of the whole provide, acquired at a median 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 presently yielding greater than 9 per cent (payable on the firm’s discretion in money or frequent inventory). The proceeds might be used, predictably, to purchase extra bitcoin.
At in the present day’s bitcoin worth of round $80,000, Technique might amass one other 262,500 bitcoins, bringing its whole 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 document capital influx into crypto markets.” It’s no exaggeration to say that Technique isn’t merely a significant 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 frequent inventory and debt introduced on Halloween 2024 — a becoming date for an organization 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, but it surely has since fallen to half that stage. 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, usually inviting shareholder activism and strain to purchase again shares. Not so for Technique, whose inventory has commanded a premium as excessive as 3.8 occasions NAV, presently standing at round 1.7 occasions. This valuation anomaly has enabled the corporate to situation 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 Road 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 definitely via further fairness issuance. This may inevitably result in dilution for present frequent stockholders. STRK, in impact, functions as a perpetual payment-in-kind instrument, mixed with an out-of-the-money name choice — an elegantly convoluted mechanism primed for important 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 rigorously lawyered threat components — is supposed to do all of the speaking. Public corporations should not speculated to hype their inventory choices, and Saylor has beforehand tread a really effective line by championing bitcoin moderately than Technique inventory itself. This newest submit, nonetheless, is more durable to elucidate away.
The general public plea is all of the extra hanging provided that again in 2001, Saylor had consented to a everlasting injunction in opposition to violating antifraud provisions of US securities legislation 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 submit seems to depend on a extra relaxed method to regulatory enforcement below the brand new Trump administration.
After all, if the worth of STRK declines, the plaintiffs’ bar might be wanting 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 means 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 median 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 characteristic, not a bug, of Technique’s method.
As for Saylor’s funding recommendation, on January 20 February 28 2025, he tweeted, “Promote your kidney in case you should, however maintain the bitcoin.” Had one adopted that steerage, the consequence can be a mark-to-market drop of 20 per cent in funding worth and a realised lack of a essential organ.
Bitcoin could come again; an excised kidney won’t. 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 frequent 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 means to craft novel securities and appeal to new consumers has helped maintain bitcoin’s rise — or, extra just lately, mood its fall — reinforcing a suggestions loop that retains the sport going.
However how lengthy can it final? Technique’s success depends upon two essential components: the continued premium of its inventory to NAV and the continued appreciation of bitcoin. If both falters, the complete edifice dangers collapse. Within the meantime, Saylor and his group 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 submit sums up Technique’s technique: strike the iron whereas it’s scorching. The query is whether or not administration’s hyper-opportunism belies the boldness they so usually 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 submit had the date incorrect for Saylor’s “kidney” tweet.
