MSTR Stocks Are A “Leverage Long” Bet on Bitcoin, says MicroStrategy CEO Michael Saylor
“We've been very intelligent about the way we put together the leverage,” said Michael Saylor, who is not interested in diversifying into other cryptos because he believes “holding Bitcoin for the long term is the highest upside lowest risk strategy” he can pursue.
Publicly-listed business intelligence company MicroStrategy is sitting on massive paper gains, about $1.5 billion if it sold its 105,085 BTC stash at current prices.
According to Bloomberg data, these gains are more than double the cumulative earnings posted by the company in the last 25 years. The nominal gain is also over 3x the revenue generated by the company since it first added Bitcoin to its treasury last August.
These gains are despite MicroStrategy having to write off millions in accounting charges related to Bitcoin.
According to the company’s second-quarter financial results, as of June 30, 2021, MicroStrategy had $3.653 billion in digital assets based on non-GAAP (generally accepted accounting principles) calculation with a non-GAAP cost basis of $2.741 billion.
Talking about racking up these accounting charges for the Bitcoin it is holding, MicroStrategy Chief Executive Officer Michael Saylor said they’re “leveraged long bitcoin” with a decade-long view. He said in an interview,
“Our view is that Bitcoin is an open digital property network and one day billions of people are going to hold digital property all our bitcoin on their mobile phones. And so we just want to get there before the billions of users get there and we're patient.”
As for why people should invest in MSTR stocks rather than directly in BTC, Saylor explained that MicroStrategy is an operating company that sweeps its operating income into the leading cryptocurrency on which they are leveraged long.
“We borrowed $2.2 billion at a blended interest rate of about 1.5% interest. So if you like bitcoin, then you definitely would like the idea of owning” this leveraged position, he added.
“So I think we've been very intelligent about the way we put together the leverage and we're unique in that regard. There is no publicly-traded company that's got our bitcoin position with the ability to raise debt and buy bitcoin with debt.”
In the 2Q21 report, the company said it would continue to “deploy additional capital” in its digital asset strategy, which involves acquiring and holding BTC. Before that, the company had filed to sell a billion dollars in new stock to raise more funds to buy the crypto asset.
“I think in time, we will buy Bitcoin. It'll just be a question of when we buy it with cash flows or with debt or with equity. And that's all just a function of market conditions. And we try to do whatever is going to be created for our shareholders,” said Saylor regarding his future Bitcoin plans.
Overall, Saylor remains “very, very bullish on Bitcoin long term,” and what they “want to hold is a form of the non-sovereign store of value forever.”
As for looking past Bitcoin, to maybe even the second-largest cryptocurrency, Ethereum, which is the platform on which DeFi and NFT sector is flourishing and is increasingly gaining the attention of institutional investors, for MicroStrategy, “holding Bitcoin for the long term is the highest upside lowest risk strategy we can pursue.” ETH -5.90% Ethereum / USD ETHUSD $ 2,922.16
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The company has no plans to diversify in crypto as “by holding bitcoin we're diversified because we can see Bitcoin sitting on the balance sheets of cities, state, governments, companies, small investors, big investors, and ultimately think Bitcoin is going to be the core to big tech innovation at Apple, Amazon, and Facebook. So we just want to be holding Bitcoin,” he said.