MicroStrategy Buys $250M in Bitcoin, Calling the Crypto ‘Superior to Cash’

[exstasie]

As a single share of Microstrategy is worth 255 USD, basically this means they are a 32% Bitcoin ETF!

It's a fun little loophole they've found. At 40%, they would be required to register as an investment company under the Securities Act, but since BTC isn't technically a security, that requirement doesn't apply.

I wonder how the SEC feels about all this.

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[fillippone]

As a single share of Microstrategy is worth 255 USD, basically this means they are a 32% Bitcoin ETF!

It's a fun little loophole they've found. At 40%, they would be required to register as an investment company under the Securities Act, but since BTC isn't technically a security, that requirement doesn't apply.

I wonder how the SEC feels about all this.

The regulator must be very angry at this. I have pointed out a few post ago, they're quite a strange bunch of people.
They are fighting a properly regulated ETF only to have an hybrid sub-regulated product freely available for everyone to buy.
For sure they are fuming about this, but I suspect the only real viable option is to release the ETF, so that the buying pressure will be on that vehicle, and not on Microstrategy (and, potentially, Grayscale).

[fillippone]

Micheal Saylor is at it Again!


https://twitter.com/michael_saylor/status/1341006691408752640?s=20


In the attached document from Microstrategy:

MicroStrategy Announces Over $1B in Total Bitcoin Purchases in 2020
December 21, 2020

PDF Version

TYSONS CORNER, Va.--(BUSINESS WIRE)--Dec. 21, 2020-- MicroStrategy® Incorporated (Nasdaq: MSTR) (the “Company”), the largest independent publicly-traded business intelligence company, today announced that it had purchased an additional approximately 29,646 bitcoins for approximately $650.0 million in cash in accordance with its Treasury Reserve Policy, at an average price of approximately $21,925 per bitcoin, inclusive of fees and expenses.

As of December 21, 2020, the Company holds an aggregate of approximately 70,470 bitcoins, which were acquired at an aggregate purchase price of approximately $1.125 billion and an average purchase price of approximately $15,964 per bitcoin, inclusive of fees and expenses.

At 12:00 midnight on December 21, 2020, the market price of bitcoin reported on Coinbase was approximately $23,910 per bitcoin.

“The Company continues to operate in accordance with its Treasury Reserve Policy and currently holds approximately 70,470 bitcoins,” said Michael J. Saylor, CEO, MicroStrategy Incorporated.  “The acquisition of additional bitcoins announced today reaffirms our belief that bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value.  We believe the proactive management of our balance sheet, combined with the improved revenue and profitability performance of the Company, have been significant factors in the recent appreciation in our stock price.”

“The Company continues to believe bitcoin will provide the opportunity for better returns and preserve the value of our capital over time compared to holding cash.  We also remain dedicated to our customers and our goal of operating a growing profitable business intelligence company,” said Phong Le, President & CFO, MicroStrategy Incorporated.  “As we work to grow revenue through HyperIntelligence®, Cloud Intelligence™ and Embedded Intelligence™ offerings, the Company expects to continue to generate positive operating income and free cash flow and will continue to evaluate the use of excess cash in accordance with our capital allocation strategy and Treasury Reserve Policy.”

Apparently, the math in my spreadsheet is correct:




Wow, things are going up fast.
They are now 50% BTC... let's look what the SEC thinks now:

[exstasie]

Micheal Saylor is at it Again!

https://twitter.com/michael_saylor/status/1341006691408752640?s=20

So that's the entire amount they raised from the debt issuance, right? $650M? So absent some new injection of cash, it looks like they're all out of dry powder now.

Average buy price $16K. Still kind of hoping for a crash below Microstrategy's average price, if only to see Saylor try to explain himself to his investors and the SEC, and to see what it does to MSTR's price.

[fillippone]

Micheal Saylor is at it Again!

https://twitter.com/michael_saylor/status/1341006691408752640?s=20

So that's the entire amount they raised from the debt issuance, right? $650M? So absent some new injection of cash, it looks like they're all out of dry powder now.

Average buy price $16K. Still kind of hoping for a crash below Microstrategy's average price, if only to see Saylor try to explain himself to his investors and the SEC, and to see what it does to MSTR's price.

Yes, I guess they have to pause now.
They are not a Bitcoin ETF, so I guess they now can focus on their core business, instead of trolling Elon Musk on Twitter.
They shifter their treasury to Bitcoin, but they core business should stay the software, not the Bitcoin.

Regarding the market Crash, why do you hope for a crash only to see Michael Saylor in a difficult position? We all would be suffering. No sorry, I prefer him to get ultra rich.

[The Sceptical Chymist]

They are now 96% in the money, impressive!

That is indeed quite impressive.  What I'm wondering is what the hell would happen if bitcoin were suddenly to crash big time like it did in 2017.  We all know that it could, even if it doesn't appear likely that it will in the immediate future.  That is a lot of money being invested in bitcoin on behalf of a publicly traded company, and it isn't likely that the USD would crash as hard as bitcoin could. 

If a crash did happen, I'm thinking there would be a lot of very angry shareholders of MSTR who'd be questioning what the hell management was thinking with the bitcoin purchases.

Nevertheless, I still give them props for taking the risk and I do wish them well (and the rest of us who hold bitcoin, too).  Hopefully 2021 will be a massive year for bitcoin.

[Upgrade00]

If a crash did happen, I'm thinking there would be a lot of very angry shareholders of MSTR who'd be questioning what the hell management was thinking with the bitcoin purchases.

Michael Saylor has expressed their interest to hold onto the bitcoins for 100 years (which I think is a way of saying we'll be hodling for a very long time, doesn't necessarily have to be the exact figure), and I believe the shareholders also agreed to it. If they intend to hold for that long then they'll definitely experience multiple crashes in the price undoubtedly, and they definitely would be expecting this considering they did their homework before diving in.

If a crash affects their stock ratings however there could be some complaints from holders about the company getting inevitably linked with Bitcoin price movements and shifting from what they originally invested in. It remains to be seen if such an effect would happen though.

[Hueristic]

Micheal Saylor is at it Again!

https://twitter.com/michael_saylor/status/1341006691408752640?s=20

So that's the entire amount they raised from the debt issuance, right? $650M? So absent some new injection of cash, it looks like they're all out of dry powder now.

Average buy price $16K. Still kind of hoping for a crash below Microstrategy's average price, if only to see Saylor try to explain himself to his investors and the SEC, and to see what it does to MSTR's price.

It would be sweet to have them on the market for a last ditch BTFD fire sale.

[fillippone]

If a crash did happen, I'm thinking there would be a lot of very angry shareholders of MSTR who'd be questioning what the hell management was thinking with the bitcoin purchases.

Michael Saylor has expressed their interest to hold onto the bitcoins for 100 years (which I think is a way of saying we'll be hodling for a very long time, doesn't necessarily have to be the exact figure), and I believe the shareholders also agreed to it. If they intend to hold for that long then they'll definitely experience multiple crashes in the price undoubtedly, and they definitely would be expecting this considering they did their homework before diving in.

If a crash affects their stock ratings however there could be some complaints from holders about the company getting inevitably linked with Bitcoin price movements and shifting from what they originally invested in. It remains to be seen if such an effect would happen though.

Their average price is 16,000 USD.
Stock to flow model price is now 23,600 USD
Given that the market price has never dropped below 50% of the model price (touch wood now), I think that we can say goodbye to the 11,000 USD price.

Losing 30% on an investment is not nice, but nonetheless, many CEO's have survived that.

Do not forget that Micheal Saylor controls 70% of the voting rights, so he can basically do what he wants, without any retaliatory powers from other shareholders. He's actually one of the longers surviving CEO on the street. Now you know why.

[exstasie]

Regarding the market Crash, why do you hope for a crash only to see Michael Saylor in a difficult position? We all would be suffering. No sorry, I prefer him to get ultra rich.

Suffering at $14K or $15K? LOL, please.

Only top buyers and leveraged longs would be suffering, and that comes with the territory in any bull market. Short term greed and exuberance often get punished.

In fact, I like seeing it punished, because it's inevitable. After the shakeout, we can safely reaccumulate and leverage long again. Much safer, less expensive (funding wise) and much better risk/reward than being long right now. So really the question should be why wouldn't I like to see a crash? It's not like I'm selling any coins down there!

As for Saylor, I'd like to see him sweat. He is so urgent to accumulate (even now going into debt to buy more) that it feels quite greedy. I want to see him punished for the same reason I want to see $24K longers punished. So the bull market can move forward. And because frankly it would be entertaining.

In the long run, we're all getting rich. I'm not concerned.

[Sithara007]

Their average price is 16,000 USD.
Stock to flow model price is now 23,600 USD
Given that the market price has never dropped below 50% of the model price (touch wood now), I think that we can say goodbye to the 11,000 USD price.

Losing 30% on an investment is not nice, but nonetheless, many CEO's have survived that.

Do not forget that Micheal Saylor controls 70% of the voting rights, so he can basically do what he wants, without any retaliatory powers from other shareholders. He's actually one of the longers surviving CEO on the street. Now you know why.

Saylor is taking a very big risk. Investing in a volatile asset such as Bitcoin can be life changing. It is true that he holds the vast majority of the voting rights, but taking one-sided decisions can end his career if it goes wrong. Other investors can withdraw from the funds, if they feel that Saylor is not listening to them. From the spreadsheet I can see that the average purchase price is around $16,000. A major correction can take the prices much below that level, but there is also a chance that the prices may move in the other direction.

[Upgrade00]

As for Saylor, I'd like to see him sweat. He is so urgent to accumulate (even now going into debt to buy more) that it feels quite greedy. I want to see him punished for the same reason I want to see $24K longers punished.

Do you consider Saylor to be one of the $24k longers? His desire to accumulate much more may not be due to the price but maybe as a result of his believe in the actual tech behind Bitcoin which drives him to get more despite the perceived high price.
A drop to $14 or $15k would not really be that significant as it would barely take off up to 10% of their average purchase price.

Saylor had earlier revealed his personal Bitcoin stash which was purchased at an average price of about $9,882, so he could have bought them at any point in the year with very little fomo then. This would suggest he was interested in Bitcoin before the price spike and actually took time out to understand the fundamentals of it (according to him). However the time taken to learn and convince the shareholders of it, even if he had majority voting power, led to them buying close to the ATH.

The situation is an ironic contrast, considering he was anti-bitcoin some 7 years ago but is now going in debt to purchase it;

Tweet
Comparing this tweet with any of his recent ones, shows he has made a complete U-turn to adopt the Bitcoin standard as many would eventually, if they're yet to.

[exstasie]

As for Saylor, I'd like to see him sweat. He is so urgent to accumulate (even now going into debt to buy more) that it feels quite greedy. I want to see him punished for the same reason I want to see $24K longers punished.

Do you consider Saylor to be one of the $24k longers?

No, he's technically a $22K longer. But close enough.

His desire to accumulate much more may not be due to the price but maybe as a result of his believe in the actual tech behind Bitcoin which drives him to get more despite the perceived high price.

Not my point. I'm talking about his sense of urgency and his exuberance. I'm talking about sentiment: "Be fearful when others are greedy, be greedy when others are fearful."

Buy spot at $12K: brilliant!
Leverage long at $22K: ?

Let's see what happens.

A drop to $14 or $15k would not really be that significant as it would barely take off up to 10% of their average purchase price.

I'm really just commenting on sentiment, and I admittedly take some pleasure in seeing fear and greed punished. Saylor thinks he's a god right now. It's not going to feel the same if his position is in the red, especially considering he went into debt to accumulate it. Compared to now, I think he'd be sweating. I'd like to see what that looks like.

Anyway, I'm just a BTC mega bull having a little fun here. Nobody need worry about Mike Saylor. He's a big boy......

[bryant.coleman]

Concerns are being raised about the possibility of mass dumping by institutional investors, in case there is a crash in the exchange rates. IMO, these fears are just unfounded. Institutional investors are more susceptible to regulatory moves from the government. However, they are less likely to indulge in panic selling, when compared to individual cryptocurrency investors. Therefore I would claim that more investment by the institutional investors will bring stability to the cryptocurrency market and will cause a decrease in volatility.

[aoluain]

Micheal Saylor is at it Again!

https://twitter.com/michael_saylor/status/1341006691408752640?s=20

Average buy price $16K. Still kind of hoping for a crash below Microstrategy's average price, if only to see Saylor try to explain himself to his investors and the SEC, and to see what it does to MSTR's price.

He wont care if the price drops below $16k, he has stated always that he is looking long term, very minimum 5 years, he talks about 30 years.

He has a very clear understanding of Bitcoin.

That last tweet tells a lot and there are keywords to pick up on, HODL, AVERAGE.

They were willing to buy at $21,925! no fear when you can look to the long term.

He also mentioned in an interview that all his board were positive about the purchase of BTC.

[bryant.coleman]

He wont care if the price drops below $16k, he has stated always that he is looking long term, very minimum 5 years, he talks about 30 years.

He has a very clear understanding of Bitcoin.

That last tweet tells a lot and there are keywords to pick up on, HODL, AVERAGE.

They were willing to buy at $21,925! no fear when you can look to the long term.

He also mentioned in an interview that all his board were positive about the purchase of BTC.

He may not be having any issue in holding for 5 years or even 30 years. But what about the other stakeholders/investors? Are they going to remain silent, in case the price dips by 80% (similar to the situation we had in 2015)? And looking at the way the Congress is going after Libra/Diem, I am not feeling very comfortable right now. I have a feeling that the authorities may target Bitcoin very soon.

[aoluain]

He wont care if the price drops below $16k, he has stated always that he is looking long term, very minimum 5 years, he talks about 30 years.

He has a very clear understanding of Bitcoin.

That last tweet tells a lot and there are keywords to pick up on, HODL, AVERAGE.

They were willing to buy at $21,925! no fear when you can look to the long term.

He also mentioned in an interview that all his board were positive about the purchase of BTC.

He may not be having any issue in holding for 5 years or even 30 years. But what about the other stakeholders/investors? Are they going to remain silent, in case the price dips by 80% (similar to the situation we had in 2015)? And looking at the way the Congress is going after Libra/Diem, I am not feeling very comfortable right now. I have a feeling that the authorities may target Bitcoin very soon.

Well im sure the stakeholders were not in the dark while investing into Microstrategy's plan.

Im sure they also realise that holding investments in FIAT based assets is actually eroding away with time.

The Microstrategy strategy is about securing wealth, the wealth has already been made they all want it to be there in 10 years time for example.

What the U.S authorities do is anyones guess and a seperate matter. They are already wrecking the $ so thats not safe anyway.

[exstasie]

He wont care if the price drops below $16k, he has stated always that he is looking long term, very minimum 5 years, he talks about 30 years.

He has a very clear understanding of Bitcoin.

That last tweet tells a lot and there are keywords to pick up on, HODL, AVERAGE.

They were willing to buy at $21,925! no fear when you can look to the long term.

He also mentioned in an interview that all his board were positive about the purchase of BTC.

He may not be having any issue in holding for 5 years or even 30 years. But what about the other stakeholders/investors? Are they going to remain silent, in case the price dips by 80% (similar to the situation we had in 2015)?

Bingo, that's more what I'm talking about. While the price is rising, life is good and Saylor doesn't have to answer to anyone.

Imagine BTC crashing so fast that MSTR triggers circuit breakers. Imagine their position stays in the red for a while, and they have to keep servicing debt just to hold unrealized losses. I'm curious how common shareholders or the SEC will react, and how Saylor will alleviate their concerns. I don't think the SEC is thrilled about what Microstrategy is doing, so I'm curious to see how that angle plays out too.

And looking at the way the Congress is going after Libra/Diem, I am not feeling very comfortable right now. I have a feeling that the authorities may target Bitcoin very soon.

You're right now that I think about it. I think I have some level of resentment towards companies like Facebook and Microstrategy because I feel like they are bringing regulators down on us as quickly as possible. They're unleashing a whole lot of pain on us. I'm not going to feel bad if Microstrategy becomes a bagholder and then incurs the wrath of their shareholders and the SEC. It would be entertaining.

[Sithara007]

Well im sure the stakeholders were not in the dark while investing into Microstrategy's plan.

Im sure they also realise that holding investments in FIAT based assets is actually eroding away with time.

The Microstrategy strategy is about securing wealth, the wealth has already been made they all want it to be there in 10 years time for example.

What the U.S authorities do is anyones guess and a seperate matter. They are already wrecking the $ so thats not safe anyway.

If the other assets were underperforming, then I could have agreed. But that is not the case. The Dow Jones Industrial Average has risen by around 65% during the last 6-7 months (ever since the start of the global COVID 19 pandemic). Most of the investors are selling their other assets (such as treasury bonds and bullion) to invest in equities. And this time, how can Saylor justify his move to invest in cryptocurrency?

[doomloop]

They are very lucky that they have bought most of their bitcoins at a lower rate and it increased very quickly. Sure they bought some at nearly 22k levels and that is a lot of money, but their average is still under 16k when you look at it, and they own nearly a billion dollars worth of it now. Which means price could drop as much as 16k and they would be still in a tiny bit of a profit, and anything above that is a profit for them too. So in order for them to lose, bitcoin needs to lose more than 40% and that is not happening anytime soon.

This is why they are capable of buying more and more because they know that they have a lot of bitcoin from lower prices. However I think Michael Saylor likes bitcoin too much to care about the price, even if it drops to very low levels he would still be bullish in the long term, we are lucky to have him at our side.