It’s been a wild ride lately for Michael Saylor, executive chairman of MicroStrategy, once a software company but now reallya leveraged play on Bitcoin. The numbers are mind-boggling. Shares of MSTR have soared 459% year to date (versus 26% for the S&P 500), while over the past two years the stock has climbed a staggering 1,831% versus 49% for the index. Trading in the stock, too, has been off the charts recently, with only Tesla and Nvidia having higher dollar volume. It’s all pretty far out.
MicroStrategy Executive Chairman Michael Saylor speaks at the Bitcoin 2024 conference in Nashville.
It’s also notable that a company with a market cap of $78 billion has only about $500 million in annual revenue. By comparison, Marriott International has about the same market cap and $23 billion in revenue.
And it’s all because of investors’ newfound, or renewed, love of Bitcoin.
I spoke with Saylor, 59, on Tuesday from his home in Miami Beach.
Barron’s: Was it the election that got investors excited about Bitcoin and MSTR? And what’s it been like since then?
Michael Saylor: Really everything started Oct. 30, when we had our earnings call and announced a capital-raising plan, the largest equity shelf registration in the history of capital markets. We spent four years building our relationship with our shareholders, and we said, “We’ve decided we should go faster now, and so we’re going to raise $21 billion of fixed income and $21 billion of equity.”
Conventional wisdom is, when you announce a $21 billion equity raise, people are worried that the market will think you’re going to dilute them, but in fact, our plan is to accrete them. [The strategy is to issue stock and use the proceeds to buy Bitcoin, which Saylor says grows faster and yields more than the S&P 500.]
The next week, on Tuesday, Nov. 5—though it wasn’t really until the next morning—it became clear it was a red sweep, with the Republicans winning the House, the Senate, and the White House, and that catalyzed a big run in the crypto markets in general. Trump had said, “We’ll end the war on crypto.” Bitcoin has gone from having like a 20% headwind to a 40% tailwind. We caught the wind and got an extraordinary boost. You can’t really predict it, but it’s a pleasant surprise. We’re happy about it, and we think that’s auspicious for the asset.
Who’s been the architect of this idea of raising equity and the zero-coupon debt you issued?
If you have to pick one person at the company to say whose idea it is, I would say I take credit. But really, it happened organically. We discovered it along the way.
Is MicroStrategy still a software company, or a company that holds Bitcoin, or a place for traders to speculate?
We’re a Bitcoin treasury company. Four years ago we were a $500 million software company, but at this point software is responsible for maybe $75 million of cash flow or earnings a year. The treasury operation is worth $5 to $10 billion a year in earnings equivalents. We have anywhere from $35 to $38 billion of Bitcoin. That’s the permanent capital of the company. Our stock has been generally returning 2x Bitcoin. It’s two times as volatile, and it’s two times as performative. And that’s because we have built in leverage from the permanent capital, from the uncertainty about when we’ll issue equity from the convertible debt that we issued and other types of instruments that drive the equity. We have an $85 billion options market, bigger than any company except for Tesla. And then you have leveraged ETFs [which hold MSTR]—MSTX [ Defiance Daily Target 2x Long MSTR] and MSTU [T-Rex 2X Long MSTR Daily Target], the most volatile ETFs in the entire stock market.
How long can you sustain this model?
If you look at this asset’s performance, you see Bitcoin is up 60% a year for the last four years. You see bonds [have low single digit annual returns over the same period]. So we’re arbitraging [almost] 0% money against 60% money. We can probably do that to 10% or 15% of our capital structure pretty continually. We’re going to go to the fixed-income market, and our plan is to issue preferred stock. I would say the strategy is very scalable, as long as you think in terms of tapping the fixed-income market.
But what’s the real value of Bitcoin?
What’s unique about Bitcoin is it’s the only commodity in the world that is capped. Every other commodity is a garbage asset as a capital asset. You wouldn’t want to capitalize on silver or soybeans or oil because they’re unlimited in theory in supply. Bitcoin is legally a commodity and ethically a commodity. It’s an asset without an issuer. It’s global, and then it’s digital and it’s fungible.
There are a lot of risk factors in buildings and equity, for instance. Bitcoin is actually a way to store value without a trusted intermediary. I’m putting my money in cyberspace, and I want to transform the capital from financial and physical to digital. It’s a digital transformation of money which strips away the risk of currency, stocks, bonds, and real estate and property. It’s like a building, but it’s a building that you can teleport to. It is indestructible, immortal, invisible, and you don’t have all the things that drag down the value of a building. So think of it as Manhattan in cyberspace.
Bitcoin is basically long-term capital preservation. It’s an asset that you could expect to last 1,000 years. Once you think about it, it inverts the world. What you have is a flow of money from the 20th century to the 21st century.
How much money are you worth?
I think I’m worth, like, nine or 10 billion [dollars]. It changes every day. Most of my wealth is in MicroStrategy stock.
Do you talk to Elon Musk much?
I talk to lots of people in the industry. I do it confidentially. I don’t share what I said or when I did it.
Are we going to have another crypto winter?
I don’t think so. Because the source of leverage that crashed us during the last crypto winter was a bunch of offshore, unregulated, ill-managed exchanges. If you look at Celsius, BlockFi, FTX, [and others], they were rickety creatures and they all got forced liquidated. They took us to the bottom. All that capital has been taken out of the system. Now the leverage in the system is different. Mostly it’s regulated players trading on regulated exchanges.
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