MicroStrategy triples down on bitcoin

We have been forced to write about MicroStrategy and its yachtophile CEO Michael Saylor a few times lately. For those not in the know, that’s the company that decided to invest billions of Federal Reserve-backed strings of 1s and 0s into bro-backed strings of 1s and 0s, and turn its equity into a HODL proxy.

You might recall our GigaChad was part of this recent dramatic and monochromatic call to arms alongside bitcoin televangelist Max Keiser, which we still can’t quite shake and so feel compelled to post again:

Last Monday, we brought you the news that the software company-turned crypto hoarder had announced it was raising $400m of senior secured debt to add to its stash of 92,079 bitcoins (about $3.7bn at this particular nanosecond’s prices).

The announcement neatly coincided with another rather less happy one: that the company also expected to incur an impairment loss “of at least $284.5m related to its bitcoin for the three months ending June 30, 2021”.

But Michael Saylor isn’t the kind of man who would let the loss of 78 per cent of his equity base get to him. Oh no — MicroStrategy is now tripling down.

Late on Monday the company announced — using a so-called “shelf registration” process, which allows issuers to offer and sell securities but without a separate prospectus for each offering — that it will be selling up to $1bn of its Class A shares to spend on “general corporate purposes” including, naturellement, “the acquisition of bitcoin”.

Earlier in the day the company announced it had completed the junk bond sale it announced last week — raising slightly more than planned, $488m — in honour of its swelling wobbly bitcoin tower. So this would be on top of that.

The company does flag some potential risks in its S-3 filing, like (emphasis ours):

if we or our third-party service providers experience a security breach or cyberattack, or if our private key is lost or destroyed, we may lose some or all of our bitcoin

!! And:

the concentration of our bitcoin holdings enhances the risks inherent in our bitcoin acquisition strategy

And:

our bitcoin holdings are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalent

And:

our bitcoin holdings could subject us to regulatory scrutiny

But it quickly gets onto more optimistic things, telling us it has just two simple strategies:

We pursue two corporate strategies: (1) grow our enterprise analytics software business to promote our vision of Intelligence Everywhere and (2) acquire and hold bitcoin, which we view as a dependable store of value supported by a robust, public, open-source architecture untethered to sovereign monetary policy.

Utterly dependable, apart from when it plunges 30 per cent in the space of a few hours. Intelligence Everywhere indeed.

Also strategy (1) is about to get some bitcoin sprinkles on it:

We are also exploring opportunities to apply bitcoin-related technologies such as blockchain analytics into our software offerings

Also the company said it has diversified into bitcoin indoctrination education:

We also believe that bitcoin offers additional opportunity for appreciation in value with increasing adoption due to its limited supply. Under this corporate strategy, we also periodically engage in activities to educate the market regarding bitcoin. We believe that our bitcoin acquisition strategy is complementary to our enterprise analytics software and services business, as we believe that our bitcoin and related activities in support of the bitcoin network enhance awareness of our brand and can provide opportunities to secure new customers for our analytics offerings

Funnily enough we actually learned something we didn’t know about bitcoin from the filing itself, so it turns out the education is in full swing:

Bitcoin can be used to pay for goods and services

Also they’ll probably add to their HODLings and are basically never selling:

We view our bitcoin holdings as long-term holdings, and we do not plan to engage in regular trading of bitcoin and have not hedged or otherwise entered into derivative contracts with respect to our bitcoin holdings, though we may sell bitcoin in future periods as needed to generate cash for treasury management and other general corporate purposes. We have not targeted any specific amount of bitcoin holdings, and we will continue to monitor market conditions in determining whether to conduct debt or equity financings to purchase additional bitcoin.

Spending like a Saylor indeed. Satoshi must be so proud.

Related links:
MicroStrategy doubles down – FT Alphaville
Maybe “bitcoin bros” aren’t really a thing after all – FT Alphaville