On Wednesday (November 26), Michael J. Saylor, Co-Founder, Chairman, and Chief Executive Officer of Nasdaq-listed business intelligence company MicroStrategy Inc. (NASDAQ: MSTR) explained why his firm is HODLING so much Bitcoin.
On August 11, MicroStrategy announced via a press release that it had “purchased 21,454 bitcoins at an aggregate purchase price of $250 million” to use as a “primary treasury reserve asset.”
Lee first asked Saylor why he had decided to invest his company’s cash in Bitcoin. Saylor replied:
“Well, the story here is due to the rapid expansion of the monetary supply by the central banks, the cost of capital has tripled from 5% to 15% over the past year, and if we look out over the next four years, bond couponsand EPS growth rates are going to need to exceed that hurdle in order to preserve wealth.
“We had $500 million of cash, but we new we were going to generate another $500 million worth of cash, and we realized that if we held it in cash, it was going to debase by 10–15% a year, and I didn’t want to lose half of it.
“So, what isn’t so well understood is the Bitcoin is the best safe haven treasury reserve asset in the world right now, and it’s engineered to be superior to gold in all aspects. So, that that being the case, a lot of people understand the asset story of Bitcoin — it’s up a 100% annually each year for the past decade more or less.
“What they don’t understand is that Bitcoin is a monetary network, and as a monetary network, it’s capable of storing and channeling energy over time without power loss. So, we got really excited about this idea, and we saw it as a solution for the store of value problem, not just for the $300 trillion of capital in the world, but for the 7.5 billion people on the planet, and so that pretty compelling.”
Lee then wanted to know if MicroStrategy of today is a software company or a Bitcoin hedge fund, i.e. why is MicroStrategy bothering to continue with the business intelligence software business if he really believes that the price of Bitcoin is going to continue going up 100% annually.
“Well, first of all, we do have a software company generating cash, but if we simply swept the cash into fiat currency and it debased 15% a year, we’d be losing as much on the balance sheet as we generated from the P&L.
“So that didn’t make sense. On the other hand, the traditional concerns about Bitcoin had been that it might be hacked, it might be copied, it might be banned, and after a decade, it hasn’t been hacked, no one’s managed to copy it, [it] is not going to be banned. So, although people look at it as being volatile, it’s volatile maybe in the first decade; the next decade going forward, it doesn’t look like it’s going to be that volatile.
“It actually looks like it’s emerging as the primary treasury reserve asset for people who are looking for some way to avoid the great monetary inflation.”
Lee then wanted to know if it did not make sense for MicroStrategy “for portfolio mnagement purposes” to be more conservative by trimming the size of its BTC position.
“Well, luckily, we love the enterprise business intelligence business and we want to be in it, but we don’t want to decapitalize the company by drawing our treasury to zero, and we don’t want to allow our treasury to be debased by 10–20% a year either; so we have to do something.
“I think that as investors start to understand the Bitcoin story, they’re going to migrate their capital on the Bitcoin network, and that’s going to create a virtuous cycle of adoption followed by price appreciation followed by value accretion followed by technology integration from companies like Square and PayPal. It will be Apple and Google shortly. That’s gonna drive more adoption, and that means that you really want to plug your company into the Bitcoin monetary.”
Lee then went back to one of her previous questions, and asked Saylor once again if MicroStrategy is a software company or a Bitcoin hedge fund.
“Our P&L is a software company, and we sell the world’s best enterprise business intelligence software. Our balance sheet is no longer invested in dollars; our balance sheet is invested in BTC because we believe that’s the best treasury reserve asset we could choose in the world.”