Bitcoin Forum

We all know what buybacks are. A situation in which company decides not to invest in the development - in better machines, better technology, improve efficiency but to buy their own shares. What for? Mostly to boost price since the decision of buybacks is made by CEOs that own big chunk of shares, they get a part of the payout in shares, they get bonuses in shares, they can buy shares at discount. This situation is very common and is performed on a huge scale:

"Biggest Buyers
CNBC lists the ten companies with the largest share repurchase announcements made in 2018 through February 15. They are listed below along with their: stock performance year-to-date, over the past year through early trading on February 20, and the amount of buybacks announced:

Cisco Systems Inc. (CSCO): $25 billion buyback
Wells Fargo & Co. (WFC): $22.6 billion buyback
PepsiCo Inc. (PEP): $15 billion buyback
Amgen Inc. (AMGN): $10 billion buyback
Alphabet Inc. (GOOGL), the parent of Google: $8.6 billion buyback
Visa Inc. (V):$7.5 billion buyback
eBay Inc. (EBAY): $6 billion buyback
Applied Materials Inc. (AMAT): $6 billion buyback
Mondelez International Inc. (MDLZ): $6 billion buyback
Lowe's Companies Inc. (LOW): $5 billion buyback"
https://www.investopedia.com/news/10-stocks-poised-outperform-record-buybacks/

How this apply to bitcoin?

"The move brought the company's total holdings to roughly $5.26 billion.
MicroStrategy's bitcoin was purchased at an average price of roughly $24,214 per coin."
"The firm's bitcoin holdings were worth roughly $5.26 billion as of March 11's price per coin. Saylor's firm acquired its bitcoin for some $2.211 billion at an average price of around $24,214 per bitcoin."

https://markets.businessinsider.com/currencies/news/michael-saylor-microstrategy-bitcoin-purchase-cryptocurrencies-digital-assets-2021-3-1030179587

So they invested 2 billion $ into bitcoin (they borrowed 1 billion to do so) and and earned 3 billion $ thanks to it.

Microstrategy marketcap pumped from $1Bilion to $7Billion. Earning 3 billion $ on speculations (not from selling services) pushed Microstrategy marketcap by $6Billion ! Having 5 Billion $ in bitcoin (1B is borrowed, so 4B$) push your company stock value by 6B$! CEOs of every single company will sooner or later realize that decision to invest even a fraction of company reserves will push price of their shares better than buybacks. They will not even care about price. The bigger the better since more hype they will have from bigger and bigger bitcoin hype. They won't care because profit for CEOs will go from pump on their stock not from bitcoin price change.

Well, that's what Saylor is predicting. It makes sense but I don't think it will inevitably be that way either. It also sounds to me more like a speculative move that turns into a bubble than a rational move backed by the intrinsic value of Bitcoin. Managers of large companies, although they are human beings and have an emotional side, are usually guided more by rationality in decision making than retail investors who are more prone to be dragged into their decisions by FOMO.

It will be rational decision. I'm not saying here that institunions will fomo into bitcoin to gain on bitcoin pump. They will FOMO into bitcoin to gain on their shares pump. As I showed on macrostrategy example. You have $4B bitcoin, your company value grow by $6B

I have my own explanation about big corporations doing stock share buybacks.
They are just full with cash reserves(Thanks to the Federal Reserve :)) and they don't want to invest in expanding their business,because of the recession,so buying back their stocks seems like the only option.
Maybe they will be convinced to buy Bitcoins some day,but maybe they won't.The Bitcoin price won't be going always up to the moon.The big corporations are searching for stability and predictability,which cannot be provided by a risky volatile asset like Bitcoin.

I wonder how you will elaborate this.


Buybacks are not 2021 case only.

"In the late 20th and the early 21st century, there was a sharp rise in the volume of share repurchases in the United States: US$5 billion in 1980 rose to US$349 billion in 2005. Large share repurchases started later in Europe than in the United States, but are nowadays a common practice around the world.[4]"
https://en.wikipedia.org/wiki/Share_repurchase

So buybacks are with us for long time. Recession is not the answer. Possibility to profit by CEOs at the expense of the managed company is the answer.

Once again. I'm not saing that insitutions will FOMO to bicoin to earn on bitcoin long term price grow. They will FOMO to bitcoin to profit on their own shares. Buy $4B of bitcoin, MC of you company grows $6B

Microstrategy didn't earn anything until they will sell their coins to take profit. If big companies would all start playing on a speculative and volatile market, many of them would get rekt, and investors would start viewing such moves negatively in general. Investing in stocks shouldn't turn into investing into BTC by proxy, that would be pretty bad for the economy if it started happening on large scale.

Now tell me please how is it possible to get rect if you, as big company, buy btc (without leverage) using 1-5% of your reserves as part of well diversified portfolio. I'm not saying that everyone will go all in now. Just small portion to be able to announce it to gather hype.

Microstrategy put all their money into bitcoin and even borrow 1B$ to buy more. Investors see this negatively?? By pumping stock price 7 times?

If you invest in bad time and lose 50-70% of your investment, shareholders would react to this very negatively. It won't ruin the company, but it will damage its reputation.


And their stock will fall when this bubble will burst, or even if they will just start taking profit. And if they will refuse to take profit and just HODL, their stock might fall even harder. Microstrategy bought Bitcoin in good time, but the deeper we are into this bull run, the riskier it is to buy Bitcoin.


This would create a massive bubble that would end very poorly for most participants.

MicroStrategy did their investment on the best time. If companies are to do the same today, it'll be hard to replicate MicroStrategy's success since the risk is far greater now than it was before. Also, MicroStrategy's stocks hang on the balance with what they did. Once bitcoin's price saw massive decline, see their stock prices plumet too. Though bitcoin is slowly becoming a 'rational' investment even to huge traditional companies, it is still riskier than most assets there is. Right place, right time, and huge balls of steel to who called the shots on MicroStrategy's bitcoin purchase. They're sitting comfortably and can sell when the going gets rough.

Buy backs mean they don't invest in anything new beyond their producing area.

Investments into bitcoin or other assets are different. It results in two possible scenarios:

• Profit: It is the one you mentioned. Price of their stocks can increase as consequence of profits from company investment. Stock investors will have double belief, in the company growth and in the profitable investment.
• Loss: it is possible. If it happens, price of stock can fall.

Here, you are mentioning about bitcoin investment that will be profitable in long term; therefore if companies invest into bitcoin AND do something like adoption for bitcoin as payment method on their services, price of their stocks will rise certainly.

If Coca-Cola will invest 1-5% of its reserves into bitcoin in bad moment loosing 50% of it (0.5% of reserves). Will it domage its reputation? No one will ever buy coca-cola? No one will even buy coca-cola shares?

Coca-cola will announce it. Bitcoin will pump 20% thanks to coca cola announcment. Coca-cola will pump 10% thanks announcment and btc pump. Everyone will be hapy in short term. In long term no one will remember. CEOs will profit on front running bitcoin pump, CEOs will profit on shares pump.


Its long-term thinking. CEOs doing buybacks does not think long-term. At least with this decision. Investing in better technology, improving efficency, expansion into new markets / countries naaah lets pump our stock price.


99% people lose on market. 1% profit. This will never change.


Time will show. If i'm right we will see more and more announcments. Already 43 companies added bitcoin into balance sheet. - https://news.bitcoin.com/btc-balance-sheets-42-companies-hold-1-3-million-bitcoin-worth-more-than-65-billion/
I assume this number will go 10x by the end of 2021-2022.

I guess it boils down on how the CEO will view bitcoin, I mean there are still some old and traditional CEO's and doesn't want to put risk on a volatile asset. On the contrary, there could be visionary CEO's who likes to dab and touch or shall we shall experiments on bitcoin to hedge their balance sheet. So for now this is 50:50 and we will see how it will swing on our favor. Microstrategy though has started that trend and it could set precedence.

In my point of view it will not matter how they see bitcoin. Putting 1-5% of reserves into bitcoin will not affect company liquidity at all no matter how volatile bitcoin is. But it will open them to all "new era" investors (gamified investing (https://www.nasdaq.com/articles/how-the-next-generation-of-investors-are-gamifying-investing-2020-12-17)). Robinhood investors, reddid trading groups, wall street bets etc.

Big companies will invest in bitcoin (smal portion os reserves) not to profit on bitcoin fundamentials but to gather bitcoin hype and get attention from "new era" investors.

I think there’s going to be a supply shortage shock soon. Institutions have probably been buying in secret OTC & just haven’t announced it yet. The peak of the bull run is nowhere near, we haven’t seen anything yet.

I agree.

1-
https://trends.google.com/trends/explore?date=all&q=Bitcoin
This shows that we are currently at 50% of 2017 bubble hype and I guess this hype will be much bigger than 2017 was.

2-
Bitcoin moves linearly on a logarithmic chart. Right before every bubble end price accelerate even on logarithmic chart. Same we've seen during 2017. When bitcoin broke trend line (defined by tops) on logarithmic chart and started to go parabolic it jumped from 7k to 19k. This was the end. We are still in trend lines on logarithmic chart now.

3-
We need to see this first :) Real wolrd attention. Real word hype. Untill now only we, crypto lovers, are hyped.

Looks like each action is accompanied by a reaction. HSBC (Hongkong and Shanghai Banking Corporation) bans new purchases of microstrategy. They allow only to hold and sell. They did id because of new policy on virtual currencies and products that referencing the performance of a virtual currencies. DAMN.

https://i.imgur.com/IOnsusq.png

https://twitter.com/Camadamus/status/1380030785911025671

Isn't it ironic though, HSBC moved vast sums of dirty money after paying record laundering fine (https://www.icij.org/investigations/fincen-files/hsbc-moved-vast-sums-of-dirty-money-after-paying-record-laundering-fine/).

One of the biggest bank that facilitated billions of dollars of dirty money, is trying to curb out and bans purchases on Microstategy by their clients?

They definetly play a dirty game. Most likely doing their best to help stop the bubble on Microstrategy - wonder how big their short position is. Hope its HSBC only not new trend.

Just wanted to say hello to NEXON Co. that just announced purchase $100 Million Worth of Bitcoin at average price of approximately $58,226.

"Thispurchase represents less than 2% of Nexon’s total cash and cash equivalents on hand."

“Our purchase of bitcoin reflects a disciplined strategy for protecting shareholder value and for
maintaining the purchasing power of our cash assets,” said Owen Mahoney, President and CEO of
Nexon. “In the current economic environment, we believe bitcoin offers long-term stability and
liquidity while maintaining the value of our cash for future investments.”

https://pdf.irpocket.com/C3659/bxTh/SDDC/wbxu.pdf

Nexon is listed in Japan so we need to wait to tomorrow to see how it will impact shares price.

I guess we just have to wait and see, wait for things to happen then. If they are buying OTC then that means that the prices will go up because it is still part of the supply. The only way that I can think that we will survive this shock is when we accumulate bitcoin ourselves.

Phew, big balls and big buys. Japanese companies don't play around with what they do so this means approval from the very top. Blue chip on Japanese stock exchange and yes, it's "only" 2% but that's already more than some companies even put in gold.

That kind of belief will only spread to others. Wonder when in my country now:)

Japanese companies don't just have big balls, they also have a lot of money available for smart investments. I still think that the Japanese economy and sophistication in all kinds of markets is widely underestimated by many.

Yep. Its first Japan company that I know that put BTC in their balance sheet. It means that they had to have approval from Japanese counterpart of SEC or even Bank of Japan (bank of japan is the biggest stock owner in Japan (Bank of Japan becomes nation’s biggest stock owner (https://www.pionline.com/markets/bank-japan-becomes-nations-biggest-stock-owner)) and significantly affects stock market prices giving liquidity and close to free money for all stock market companies).

This might be bigger news that I thought from the begging.

Exactly. Japan is super strict on these things and their own bad experience from crypto (Mt Gox) making Bitcoin a legal currency (I believe also the first in the world to do so as a national law) laid the path for this to happen. Whereas if Microstrategy would get heat from traditional players who will tell them they are irresponsible to gamble, in Japan this move will be respected and acknowledged to be innovative. That's Japan for you slow and quiet, but this will be really the big news people ignored:)