Michael Saylor's company has not launched any popular products or services. What he and MicroStrategy have done is to issue new shares 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 cryptocurrency 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 the party in a black suit jacket and a 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 holds nearly 1% of MicroStrategy.
Fans say this premium reflects their belief that Saylor can continue to profit from his Bit bet. They believe that the total supply of Bit is limited to 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 shares at high prices and selling bonds to the company at favorable terms, while expanding MicroStrategy's Bit reserves.
"This premium is reasonable and will persist," says Jordi Visser, a veteran Wall Street figure who recently worked at Morgan Stanley and has 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. authorities, who had previously claimed he actually lived in the district, not Florida or Virginia as he had 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 and a college friend founded MicroStrategy 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, and sold 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. This 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.
Later that year, Saylor and two other executives, as well as the company, paid $11 million to settle SEC accounting fraud charges related to the restatement. The SEC alleged the company had inflated revenues and earnings, showing profits instead of losses, but Saylor and others neither admitted nor denied the allegations.
In July 2002, MicroStrategy's stock closed at 45 cents, a far cry from its 2000 peak of $313, and the company faced debt issues.
Over 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. For 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 barely moved for years, with dim growth prospects. 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 soon 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 an average price of about $11,000 per coin. He also invested over $100 million of his own money. However, the Bit price then fell to $9,000, resulting in MicroStrategy recording about $40 million in losses on paper.
"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 did not 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 fell below $17,000, causing MicroStrategy's stock to drop to around $17. The company's Bit cost basis is 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 Bit through the issuance of stocks and bonds, and the price of Bit has continued to rise, the company's stock price has begun to soar. According to Mark Palmer, an analyst at the investment bank enchmark 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 Bit remains unwavering. He emphasizes that the supply of Bit is limited, which is different from the U.S. dollar and even gold. Saylor believes this makes Bit perform better in resisting inflation. He also stated that the digital nature of Bit makes it more convenient and less costly for its 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 Bit and Bit ETFs, so MicroStrategy's stock has become an indirect way for them to bet on Bit. Even some large, conservative investors see 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, common stock, and so on, 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, whose fund heavily invests in Bit and provides advisory services for a fund that holds MicroStrategy stock.
Over the past month or so, Saylor has been heavily promoting MicroStrategy and Bit on TV shows, popular podcasts, industry conferences, and other occasions. "If you don't buy Bit at the top, you're missing out on an opportunity to make money," he recently tweeted.
"He is passionate in public, but more nuanced in private," said Matt Hougan, chief investment officer of crypto asset management firm Bitwise, who heard Saylor give a speech at a dinner with 12 investors last summer. His company manages an ETF that holds MicroStrategy stock.
If the price of Bit continues to rise, the premium on holding MicroStrategy stock may persist. However, if the price of Bit crashes, MicroStrategy's stock price may also fall. Even if the premium disappears, as long as the price of Bit remains 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 Bit, with an average cost of about $62,000. Only when the price of Bit falls below $16,000 and remains at that level when the debt matures will the value of the Bit held by the company 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 Bit 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 stock price.
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