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

[JayJuanGee]

I don’t know if the example is on purpose or not, but actually Turkey has been a constant buyer of gold reserves during the last months. They could easily switch their initiative to digital gold!

Oh, man....I don't know if Saylor's idea is a good one, even if he and his company have made a killing since investing in bitcoin.  He's basically saying that a country's bitcoin investment could be multiplied by 10 in 5 year's time, and while that could be true, we all know how volatile it is and, if we're being honest with ourselves, we don't know what the future of bitcoin is going to be.  

Gold has maintained a fairly stable price over the years, whereas bitcoin has only existed since 2009 and it's not unheard of to drop in valuation by 50% or more in a very short time period.  I just don't think it'd be wise for governments to invest heavily in it.  Saylor is saying (without actually using the words) that countries should engage in currency speculation because they stand to make massive profits--but these are governments we're talking about!  The money they have is used for all types of public goods and services, and many countries just can't afford to gamble (there, I said it) on a cryptocurrency that's notorious for its stomach-wrenching price swings.

You seem to be implying that betting on bitcoin would be an all or nothing proposition, and even if Saylor went balls to the wall in on bitcoin, he does not even seem to be suggesting the same for others, whether we are talking companies, individuals or countries.

In other other words The Pharmacist, you seem to be suggesting that countries need to apportion their risks appropriately... in other words, countries, companies and individuals should be considering the bitcoin investment matter in similar ways and get the fuck in... earlier rather than later.. earlier rather than waiting ..

Sure, there are questions about how much to invest into bitcoin, but there should not be questions about not investing.  

The risky investment is staying in dollars (or dollar denominated investments).. actually staying in dollars is not a risk because you know  yes.. you actually know.. that you are going to lose money for sure.. 100%.. so the only way to preserve some of your wealth is to invest into something other than the dollar, and bitcoin seems to be a very good candidate.. even with 1% to 10% of your investible assets.. if you are more risk averse, as you, The Pharmacist, seem to be suggesting that countries should be, then you invest at the lower end of the 1% to 10% range rather than the higher end of the range.. being risk averse does not mean NOT investing.. so there you have it..

If you want to have fun staying poor, then probably the best move is to NOT invest into bitcoin at all (and a lot of countries, companies and individuals are still on zero when it comes to bitcoin), especially while we are in the midst of what seems to be the greatest wealth transfer in history.. which also involves bitcoin as the center piece to this current and ongoing dynamic wealth transfer dynamic.,. whether you merely want to look at ONLY the downside potential of such.. which is a blinded way of thinking about the whole matter..

This should not be "all or nothing" thinking, but instead making appropriate, adequate and meaningful investments/allocations and get the fuck off of zero wether you are an individual, a company or a country or some other entity that needs to consider wealth preservation and investing in these seemingly trying times.

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[Lucius]

I would not consider that a country being "hostile" to bitcoin as a matter of excluding them from coming around to "see the light" regarding bitcoin as an investment thesis.

I may be wrong and Saylor knows something we don't, but if we look at Turkey from the perspective of human rights and freedoms, their foreign policy, and various other factors - I'd say they're not a good candidate for a country to buy Bitcoin into its monetary reserves.

Of course, all of the above does not have to be a decisive decision when it comes to a country's financial policy, but unlike Saylor who is arguably one of the biggest believers in Bitcoin, he represents his company in which he has absolute supremacy - and on the other hand, any country that would officially invest in Bitcoin would have not only a possible financial loss but also political responsibility in case of failure. I'm not just talking about price here, it's also about security risk - because it's one thing to invest in Bitcoin and quite another to keep it safe and secure.

[JayJuanGee]

I would not consider that a country being "hostile" to bitcoin as a matter of excluding them from coming around to "see the light" regarding bitcoin as an investment thesis.

I may be wrong and Saylor knows something we don't, but if we look at Turkey from the perspective of human rights and freedoms, their foreign policy, and various other factors - I'd say they're not a good candidate for a country to buy Bitcoin into its monetary reserves.

I am not sure about what the point would be to discuss whether someone, some entity or some country is a "good candidate" to get into bitcoin or not because it is not like we have any kind of choice.

Either they get in or they don't, and that is the choice of each of the entities, so even if we say that they are a good candidate or not, it is not like we can stop them from doing what they want... so why get worked up about it?

Of course, all of the above does not have to be a decisive decision when it comes to a country's financial policy, but unlike Saylor who is arguably one of the biggest believers in Bitcoin, he represents his company in which he has absolute supremacy - and on the other hand, any country that would officially invest in Bitcoin would have not only a possible financial loss but also political responsibility in case of failure. I'm not just talking about price here, it's also about security risk - because it's one thing to invest in Bitcoin and quite another to keep it safe and secure.

Each entity whether we are talking about Microstrategy or some other kind of company or a country is going to make different decisions regarding how to secure their bitcoin depending on how much they have and how decisions about managing finances are made.  Of course, individuals and closely held companies are going to have more options than BIGGER institutions, or more diversely held companies or governments might have custodial and reporting requirements that individuals do not have.

[fillippone]

Microstrategy released they last 2021 Q3 Earning call.

MicroStrategy Announces Third Quarter 2021 Financial Results

Regarding Digital Assets, they stated:

• Digital Assets: As of September 30, 2021, the carrying value of MicroStrategy’s digital assets (comprised of approximately 114,042 bitcoins) was $2.406 billion, which reflects cumulative impairment losses of $754.7 million since acquisition and an average carrying amount per bitcoin of approximately $21,095. As of September 30, 2021, the original cost basis and market value of MicroStrategy’s bitcoin were $3.160 billion and $4.965 billion, respectively, which reflects an average cost per bitcoin of approximately $27,713 and a market price per bitcoin of $43,534.56, respectively. Additional information on MicroStrategy’s digital asset holdings is included in the “Digital Assets – Additional Information” tables at the end of this press release.
• Open Market Sale Agreement: On June 14, 2021, MicroStrategy entered into an Open Market Sale Agreement (the “Sale Agreement”) with Jefferies LLC, as agent (“Jefferies”), pursuant to which MicroStrategy may sell shares of its class A common stock having an aggregate offering price of up to $1.0 billion from time to time through Jefferies. During the three and nine months ended September 30, 2021 the Company sold 555,179 shares of its class A common stock under the Sale Agreement, at an average gross price per share of approximately $727.64, for aggregate net proceeds (less $4.5 million in sales commissions and expenses) of approximately $399.5 million. As of September 30, 2021, approximately $596.0 million remained available for sale pursuant to the Sale Agreement.
  

Those impairment losses are hard to calculate.
Accoring to their first Earning Report with Digital Assets:

Digital Assets: As of September 30, 2020, the carrying value of MicroStrategy’s digital assets (comprised solely of bitcoin) was $380.8 million, which reflects cumulative impairments of $44.2 million since acquisition. MicroStrategy accounts for its digital assets as indefinite-lived intangible assets, which are initially recorded at cost. Subsequently, they are measured at cost, net of any impairment losses incurred since acquisition. MicroStrategy determines the fair value of its bitcoin based on quoted (unadjusted) prices on the active exchange that MicroStrategy has determined is its principal market for bitcoin. MicroStrategy considers the lowest price of one bitcoin quoted on the active exchange at any time since acquiring the specific bitcoin. If the carrying value of a bitcoin exceeds that lowest price, an impairment loss has occurred with respect to that bitcoin in the amount equal to the difference between its carrying value and such lowest price. Impairment losses are recognized as “Digital asset impairment losses” in MicroStrategy’s Consolidated Statements of Operations. As of September 30, 2020, the average cost and average carrying value of MicroStrategy’s bitcoin were approximately $11,111 and $9,954, respectively. As of October 26, 2020, at 4:00 p.m. EDT, MicroStrategy had 38,250 bitcoins and the market price of one bitcoin in the principal market was approximately $13,023.      

         
               
Basically, each Bitcoin is valued at the minimum price since their buying.
Impressive!


               
               
               
               

[Daltonik]

MicroStrategy CEO Michael Saylor expressed his opinion about bitcoin's prospects for growth and how he believes it is that bitcoin will grow forever, while maintaining volatility risks.
 Michael Saylor also stated that MicroStrategy will continue to buy cryptocurrency based on market conditions. "I think within a decade bitcoin will be the strongest, most complex and technically promising store of value in the economy," he said.
 MicroStrategy is open to using debt or equity to fund its growing bitcoin holdings CEO Michael Saylor said. Saylor thinks that stablecoin will reach a market capitalization of $10 trillion if regulators provide a transparent structure around it.
https://seekingalpha.com/news/3761719-microstrategy-ceo-bitcoin-is-going-up-forever

[Lucius]

MicroStrategy CEO Michael Saylor expressed his opinion about bitcoin's prospects for growth and how he believes it is that bitcoin will grow forever, while maintaining volatility risks.

Should we expect any other statement from the man who threw all the cards at Bitcoin? Although I think that when it comes to price, there is a lot of room for growth - but I would not dare to use the term "forever".

Saylor thinks that stablecoin will reach a market capitalization of $10 trillion if regulators provide a transparent structure around it.
https://seekingalpha.com/news/3761719-microstrategy-ceo-bitcoin-is-going-up-forever

Why would transparency be a condition of their capitalization when they are doing very well even now? If they continue at this pace, they will reach it at some point - which is generally bad, because we all know that the weak point of almost all stablecoins is the possibility of their freezing no matter where they are. According to CMC, the current value of all stablecoins is just under $133 billion.

[fillippone]

MicroStrategy CEO Michael Saylor expressed his opinion about bitcoin's prospects for growth and how he believes it is that bitcoin will grow forever, while maintaining volatility risks.

Should we expect any other statement from the man who threw all the cards at Bitcoin? Although I think that when it comes to price, there is a lot of room for growth - but I would not dare to use the term "forever".

He of course has some interest in what he's saying, but the rationale below this bullish statement is that once the orange coins start following the S2F model, then all the future halving will start getting priced in, getting a hyperbolic price appreciation.
Eventually, the S2F model will break, as the dollar will break.
Uberbullish point of view (understandable, for someone who's sitting on such a gargantuan number of coins).

[paxmao]

I would rather not invest through Microstrategy, but it may be a great vehicle for people that can have that type of company included into a tax wrapper. Bitcoin as itself could not be used in these fiscal instruments until recentlyand even now many of the ETF or ETCs are not considered valid in certain jurisdictions, so there is an use for MS but best to avoid if you can.

[fillippone]

I would rather not invest through Microstrategy, but it may be a great vehicle for people that can have that type of company included into a tax wrapper. Bitcoin as itself could not be used in these fiscal instruments until recentlyand even now many of the ETF or ETCs are not considered valid in certain jurisdictions, so there is an use for MS but best to avoid if you can.

What wrap Microstrategy in your vehicle when you have much more efficient ways to do that? Enow you have even an ETF in the US, but in Europe you have plenty of ETP that replicate the Underlying with great accuracy.

[Daltonik]

MicroStrategy CEO Michael Saylor believes that bitcoin will continue to become more valuable if governments around the world continue to pursue inflationary fiscal policies.
In an interview with CNBC TechCheck host Deirdre Bosa, Saylor explains that, in his opinion, bitcoin will grow forever due to its limited supply, which cannot increase regardless of demand and price.

“I want to say that bitcoin is the only deficit that anyone can invest in in the world.There is also a correlation between the rise in the price of bitcoin, while inflation leads to a decrease in the value of traditional currencies. Gold is not fixed. The supply of gold increases by 2% per year in the physical mode. Bankers can reprint gold and print 100 ounces of paper gold for every real ounce of gold.
Bitcoin is the dominant digital money network, and because it dominates and because it is fixed, it means that it is the most reliable, the most honest, the rarest thing in the financial universe... Bitcoin is growing forever”"” - said Michael Saylor.

[fillippone]

Bitcoin is the dominant digital money network, and because it dominates and because it is fixed, it means that it is the most reliable, the most honest, the rarest thing in the financial universe... Bitcoin is growing forever”"” - said Michael Saylor.

I guess that part was a reference to the original interview on Bloomberg TV with Laura Shin. They wanted to rehearse that moment at all costs!
This was quite obvious to me, but maybe not everyone got the reference.

On a separate note, wondering when we will see another purchase by Microstrategy. It has been a while since last time.

[Daltonik]

Microstrategy CEO Michael Saylor spoke about bitcoin's prospects in an interview with CNBC's "Squawk Box" program last Friday. He discussed the institutional implementation of bitcoin, the regulation of cryptography.
His company currently owns 114,042 BTC. He was asked if he was going to continue accumulating bitcoin at the current price or wait for a further pullback. To this he replied“ "We will continue to add forever." According to him, the prospect of increasing the capitalization of bitcoin a hundred times is quite achievable and can reach the $100 trillion mark, in any case, he believes in it.

[The Sceptical Chymist]

On a separate note, wondering when we will see another purchase by Microstrategy. It has been a while since last time.

I don't know about the rest of you, but I never expected them to just keep buying until they run out of cash or credit, which would eventually happen if MSTR continued their bitcoin buying spree.  As I've said before, that money to buy all that BTC has got to come from somewhere, and I don't think it's realistic for them to flood the market with corporate bond issuances just to keep the crypto rolling in. 

Deep underneath all of that bitcoin investment is a business that has to run and is accountable to its shareholders.  They aren't some sort of bitcoin holding company, after all, no matter how bullish Michael Saylor is.

[JayJuanGee]

Microstrategy CEO Michael Saylor spoke about bitcoin's prospects in an interview with CNBC's "Squawk Box" program last Friday. He discussed the institutional implementation of bitcoin, the regulation of cryptography.
His company currently owns 114,042 BTC. He was asked if he was going to continue accumulating bitcoin at the current price or wait for a further pullback. To this he replied“ "We will continue to add forever." According to him, the prospect of increasing the capitalization of bitcoin a hundred times is quite achievable and can reach the $100 trillion mark, in any case, he believes in it.

Thanks for that summary Daltonik.

It is funny that Saylor has been recently engaging in a kind of "trolling" behavior by playing on that "forever" meme idea... And, I doubt that he is even being untruthful even if it comes off as a bit of an exaggeration that attempts to make a point that continues to have difficulties sinking in for normies and for mainstream financial and media institutions.

Down the road, let's say after 1-2 cycles or even 4-10 years into the future, Saylor is likely going to be able to look back and say:  "it's not like I did not try to tell many/most of you folks, but even when I did you had difficulties getting the idea of "forever" to literally sink into your thick lil noggins."

On a separate note, wondering when we will see another purchase by Microstrategy. It has been a while since last time.

I don't know about the rest of you, but I never expected them to just keep buying until they run out of cash or credit, which would eventually happen if MSTR continued their bitcoin buying spree.  As I've said before, that money to buy all that BTC has got to come from somewhere, and I don't think it's realistic for them to flood the market with corporate bond issuances just to keep the crypto rolling in. 

I hate to continue to appear to be harping on you Pharmacist, but you seem to have a whole hell of a lot of difficulties appreciating MSTR's ongoing aggressive strategy, and the likelihood that it is way less risky than you are making it out to be.  You seem to be continuing to create your own risk management framework and proclaiming that MSTR is in violation of it, but in a lot of senses, you are seeming to fail/refuse to appreciate what MSTR is actually doing and how the proportions play out.

Deep underneath all of that bitcoin investment is a business that has to run and is accountable to its shareholders.  They aren't some sort of bitcoin holding company, after all, no matter how bullish Michael Saylor is.

Surely you are correct that there are two parts of MSTR's business, and surely the relatively BIG ASS stake that MSTR has taken in bitcoin has converted them into a kind of BTC holding company.. and even if that BTC holding company was not MSTR's original vision (or even within their vision two years ago), the company has pivoted - and surely has done such pivoting in a very interesting way.. including their ongoing public disclosures that likely remain part of how they are able to get away with nearly completely changing from what they used to do to what they are now doing, and no shareholder would have any kind of leg to stand upon in claiming that "I did not know" blah blah blah.  I am not even saying that some of the shareholders might attempt to make those kinds of claims that they did not know or they were tricked or that some government institutions might not want to "come after" Saylor, so surely in that regard, there are going to be some potentially whiney folks who are going to want to make similar kinds of claims that you are making Pharmacist, and we will have to see how that goes (if it ends up happening).

Actually, likely another angle that Saylor is attempting to play is that if he can get companies to go even BIGGER than MSTR (and he) is going, then that will also provide additional protections for him regarding the bitter and whiney claims that could come from shareholders, governmental institutions or even  status quo financial institutions or status quo rich folks who are going to be victims of the greatest wealth transfer in history especially if they continue to fail/refuse to take more aggressive positions into joining rather than fighting bitcoin.

[fillippone]

As I've said before, that money to buy all that BTC has got to come from somewhere

I had the distinct thought that all those BTC buys came from their business revenues, being converted into bitcoin, instead of sitting on their cash accounts.
I am not referring of course to their bond issuance program (or ATM feature) but those smaller 10/20 millions clips.
Either of I was wrong, or their cash balance is a little bit stripped at the moment, as try think have little incentive to issue new debt to buy more bitcoin, also given the relatively high price in terms of S2F model.

I reckon that they still are a software company, as I really struggle looking at them as a "bitcoin proxy" firm.

[Dabs]

They are a software company, and I think their business is some sort of subscription model. To continue to get business intelligence, you have to continue to pay them. That's probably where their cash is coming from, from other people.

When that stops, then they stop buying. But it's not going to stop any time soon.

Most people continue to pay for paid stuff like music or movies (spotify premium, netflix, amazon prime stuff, ...) and that's just for entertainment, not business. Businesses are likely to continue to pay for business stuff that helps them make more money.

[fillippone]

That's probably where their cash is coming from, from other people.

I am pretty sure about this, I am just saying that MSTR started buying small clips in a few millions at a time and they basically stopped. So I am just wondering if they haven't positive free cashflows anymore, or they are trying to wait for more favorable prices (something somewhat inconsistent with Saylor "it's going up forever Laura, forever").

[The Sceptical Chymist]

I had the distinct thought that all those BTC buys came from their business revenues, being converted into bitcoin, instead of sitting on their cash accounts.

Could be; I haven't exactly analyzed how they do business or what they do with their cash flow from operations.  I hadn't even looked at their summary on my brokerage account but just did and it looks like their earnings per share are -$45.46(!).  It certainly doesn't seem like they're making a profit from whatever it is that they do for their core business, does it?  That's assuming the data I just dropped is accurate, of course. 

And wow, for a company that has a negative P/E, they sure do have a crazy stock price.  Another interesting stat I just found out is that the short interest in MSTR is 20.28%, so there are a lot of people out there who are just waiting for that stock price to crash--and as much as I support Michael Saylor's dedication to bitcoin and wish him well, I have a feeling that that's exactly what the stock is going to do, crash.  Of course, I've been expecting the whole market to crash for a few years now and it just never seems to happen.

I reckon that they still are a software company, as I really struggle looking at them as a "bitcoin proxy" firm.

Well, when a company owns that much bitcoin and it's clear that they don't intend on selling any of it anytime soon, it's inevitable that investors are going to see it as a way to indirectly invest in bitcoin, similar to buying gold/silver/copper mining stocks if you want to get exposure to metals.  I don't see that as a bad thing.

[oHnK]

Well, when a company owns that much bitcoin and it's clear that they don't intend on selling any of it anytime soon, it's inevitable that investors are going to see it as a way to indirectly invest in bitcoin, similar to buying gold/silver/copper mining stocks if you want to get exposure to metals.  I don't see that as a bad thing.

Like other companies that keep their company's investment assets as their new business line, even though it is not explicitly stated by the CEO if the business operations have been supported by 51% of the investment results, it can be said that the business has changed according to the new investment.  However, if I see that MSTR is currently only investing and has not even sold it, it means that no return has been realized, can it be said that their business has changed?  But if it is said to only support the company's value, I agree.

[fillippone]

I had the distinct thought that all those BTC buys came from their business revenues, being converted into bitcoin, instead of sitting on their cash accounts.

Could be; I haven't exactly analyzed how they do business or what they do with their cash flow from operations.  I hadn't even looked at their summary on my brokerage account but just did and it looks like their earnings per share are -$45.46(!).  It certainly doesn't seem like they're making a profit from whatever it is that they do for their core business, does it?  That's assuming the data I just dropped is accurate, of course.  

And wow, for a company that has a negative P/E, they sure do have a crazy stock price.  Another interesting stat I just found out is that the short interest in MSTR is 20.28%, so there are a lot of people out there who are just waiting for that stock price to crash--and as much as I support Michael Saylor's dedication to bitcoin and wish him well, I have a feeling that that's exactly what the stock is going to do, crash.  Of course, I've been expecting the whole market to crash for a few years now and it just never seems to happen.

When I am back to the civilised world, I will try to come out with a summary of the short interest on MSRT. I reckon this could be quite interesting actually.