Compiled by | Luffy, Foresight News
Michael Saylor's company has not launched any popular products or services. What he and MicroStrategy have done is to issue new stocks and bonds at a rate rarely seen in corporate history, and then invest all the funds in Bit, vowing to do so repeatedly.
Over the past year, MicroStrategy's stock price has risen by about 690%. The 59-year-old executive chairman owns about 10% of the company's shares, worth about $9.7 billion, and he also personally owns about $1.9 billion worth of Bit.
Saylor has become a public figure in the recent Bit craze, with nearly 4 million followers on the X platform (formerly Twitter). To celebrate the Bit price breaking $100,000, Saylor hosted a New Year's party at his Miami Beach mansion, inviting hundreds of members of the crypto community, with his luxury yacht moored nearby. At the party, six gold-clad dancers performed. Luminaries and investment heavyweights gathered, including former Legg Mason fund manager Bill Miller, Fortress Investment Group chairman Peter Briger, and key portfolio manager Mark Casey of Capital Group. The event was live-streamed on YouTube to tens of thousands of Bit enthusiasts, with Saylor hosting in a black suit jacket and Bit-themed T-shirt.
People's enthusiasm for Saylor's company is so high that a puzzling situation has arisen: MicroStrategy holds about $47 billion worth of Bit, but its market capitalization is $97 billion. It's as if investors are paying $2 to buy a $1 bill. Surprisingly, experienced investors are among the biggest buyers, including the powerful mutual fund company Capital Group, which held about 8% of MicroStrategy as of September 30, and Norway's sovereign wealth fund Norges Bank Investment Management, which manages $1.5 trillion in assets and held nearly 1% of MicroStrategy.
Fans say the premium reflects their belief that Saylor can continue to profit from his Bit bet. They believe that the total supply of Bit is capped at 21 million, and this scarcity will increase its value. SYZ Capital partner Richard Byworth, who personally holds MicroStrategy stock, says Saylor is creating value for shareholders by issuing stock at high prices and selling bonds to the company on favorable terms as he expands MicroStrategy's Bit reserves.
"This premium is justified and will persist," says Jordi Visser, a veteran Wall Street figure who previously worked at Morgan Stanley and recently bought MicroStrategy stock. "No one else can do what he's doing. They own about 2% of the Bit supply, who else can own more?"
However, Saylor's strategy also carries huge risks. He has ridden the investment waves, only to be wiped out when the waves crested, sometimes losing tens of billions of dollars in personal wealth in a single day.
Saylor declined to comment on this article.
Saylor has never married and will turn 60 next month. He has had setbacks in his career and has clashed with financial regulators. Last year, he agreed to pay $40 million to settle a dispute over income taxes with Washington, D.C., after officials there said he actually lived in the district, not Florida or Virginia as he claimed.
Saylor's father was a career Air Force officer. Saylor studied aerospace and science at MIT and joined the Air Force ROTC. A few years after graduating, in 1989, he founded MicroStrategy with a college friend in Tysons Corner, Virginia, initially a data mining software company.
In the late 1990s dot-com boom, MicroStrategy rose rapidly. Saylor's stock was worth about $10 billion, enough for him to host lavish parties for employees and others, and organize Caribbean cruises. MicroStrategy also bought domain names like Mike.com, Michael.com, Hope.com and Voice.com, selling Voice.com for $30 million.
But when the internet bubble burst in 2000, it all came crashing down. As regulators scrutinized the industry's revenue recognition practices, MicroStrategy was forced to restate its revenues and earnings. The dramatic defeat even attracted tabloid attention: In March of that year, the New York Daily News ran a story headlined "Lost $6 Billion in a Day" with a photo of the then-35-year-old Saylor, looking dazed in a suit and tie.
Saylor has long been a public figure in Bit, pictured speaking at a conference in 2023
Later that year, Saylor and two other executives, as well as the company, paid $11 million to settle SEC accounting fraud charges, neither admitting nor denying the allegations that the company had inflated revenues and earnings to show a profit instead of a loss.
In July 2002, MicroStrategy's stock closed at 45 cents, a far cry from its 2000 high of $313, and the company faced debt issues.
Over a lunch at a Bridgehampton, New York, estate, venture capitalist Rick Rickertsen expressed sympathy to Saylor and asked if he was worried about losing his company.
"Possibly," Saylor said, "but I'll start over."
Saylor restructured MicroStrategy's debt and implemented a 10-for-1 reverse stock split to avert the crisis. Over the years, Saylor has been searching for the next big opportunity. For a time, he made substantial personal gains by investing in stocks like Google and Apple, but dismissed Bit, tweeting in 2013 that Bit "has no future."
By 2020, MicroStrategy's stock had languished for years with little growth prospect. The company was worth only $1.5 billion, but it was still profitable and had about $500 million in cash.
During the COVID-19 pandemic in 2020, Saylor pondered what to do with the company's cash from his home in Miami. Concerned that government spending to maintain economic stability could lead to inflation, Saylor re-examined Bit and became a staunch supporter. He quickly proposed to the board that the company use its cash to buy Bit, and the board agreed, largely because the company seemed to have no better options. They felt the move would at least attract some beneficial attention.
"The company was going nowhere, with hardly any Wall Street attention," Rickertsen, who later became a board member, said. "The prospects were bleak."
That year, Saylor used about half the company's cash, around $250 million, to buy Bit at around $11,000 per coin. He also invested more than $100 million of his own money. However, Bit prices then fell to $9,000, and MicroStrategy recorded about $40 million in paper losses.
"Most of us on the board said, 'Oh my God, what have we done, we're going to get sued,'" Rickertsen said. "Saylor was worried too."
The panic didn't last long. Bit prices began to rise, breaking $26,000 by the end of 2020. MicroStrategy borrowed billions of dollars to buy more Bit, including a $205 million floating-rate loan at 8.27%, a challenging loan at the time.
Then, in late 2022, the crypto exchange FTX collapsed, and Bit prices fell below $17,000, dragging MicroStrategy's stock down to around $17. The company's Bit cost basis was around $30,000, resulting in paper losses. Rumors swirled that the company was in trouble. But Saylor and the company doubled down.
As Saylor has stepped up his strategy of buying Bitcoin through the sale of stocks and bonds, and Bitcoin prices have continued to rise, the company's stock price has begun to soar. According to Mark Palmer, an analyst at investment bank Benchmark Company, MicroStrategy raised $23.2 billion through stock and bond sales in 2024 alone.
Saylor's promotional rhetoric may be somewhat repetitive and simple, but his belief in Bitcoin remains unwavering. He emphasizes that Bitcoin's supply is limited, which is different from the U.S. dollar and even gold. Saylor believes this makes Bitcoin perform better in resisting inflation. He also states that Bitcoin's digital nature makes it more convenient and cost-effective for holders to store and use, without the need for intermediaries, making it a "revolutionary" form of currency.
Some mutual funds and other institutions have internal rules prohibiting the purchase of Bitcoin and Bitcoin ETFs, so MicroStrategy's stock has become an indirect way for them to bet on Bitcoin. Even some large, conservative investors view the stock as a potential way to gain an advantage over competitors who are unwilling to venture into cryptocurrencies.
It turns out that Saylor is adept at creating different types of equity and debt investment products, such as bank loans, convertible bonds, and common stock, to ensure a steady flow of funding.
"His strength lies in creating different products for different audiences," said Brett Messing, a senior executive at Bridgewater Capital, which manages funds heavily invested in Bitcoin and provides advisory services for a fund that holds MicroStrategy stock.
Over the past month or so, Saylor has been actively promoting MicroStrategy and Bitcoin on TV shows, popular podcasts, industry conferences, and other platforms. "If you don't buy Bitcoin at the top, you're missing out on an opportunity to make money," he recently tweeted.
"He is eloquent in public, but more nuanced in private," said Matt Hougan, chief investment officer of crypto asset management firm Bitwise, who heard Saylor speak at a dinner with 12 investors last summer. Bitwise manages an ETF that holds MicroStrategy stock.
If Bitcoin prices continue to rise, the premium on holding MicroStrategy stock may persist. However, if Bitcoin prices crash, MicroStrategy's stock price may also fall. Even if the premium disappears, as long as Bitcoin prices remain stable, its stock price may still be affected. Skeptics point out that some similar investment vehicles, such as closed-end funds, often trade at a discount to the value of their underlying assets, rather than a premium.
However, the company may not face an existential crisis. MicroStrategy currently has $7.26 billion in unsecured debt, most of which was issued at very low interest rates. The company holds 450,000 Bitcoins, with an average cost of about $62,000. Only when Bitcoin prices fall below $16,000 and remain at that level when the debt matures will the value of the company's Bitcoin holdings be less than its debt.
Just over a week ago, Saylor announced a brand-new way for MicroStrategy to raise funds from investors to support its Bitcoin purchase plan. He announced that the company will sell $2 billion in "perpetual preferred stock" this quarter. This news prompted analyst Palmer to reiterate his $650 target price for MicroStrategy stock, which is about 65% higher than the current share price.
