(Bloomberg) — In the midst of the Covid-19 crisis, MicroStrategy Inc.’s Michael Saylor made the then little-noticed decision to invest the enterprise-software maker’s cash into Bitcoin.
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Before the shift in the middle of 2020, the Tysons Corner, Virginia-based company Saylor co-founded had about $500 million mostly invested in short-term U.S. government securities. At the time, Saylor said he began to question that conventional strategy when yields tumbled in the wake of the pandemic. He called his cash hoard a “melting ice cube,” predicting accurately that inflation would surge after the Federal Reserve relaxed policy.
Now, almost four years later, Saylor is one of the most prominent advocates of the cryptocurrency and the company’s Bitcoin holdings are worth a staggering $10 billion after the most recent price rally. MicroStrategy is sitting on unrealized gains of almost 70% based on the cost of the Bitcoin held.
MicroStrategy said earlier this month that it owned 190,000 Bitcoin purchased at a total cost of $5.93 billion, or $31,224 each, as of Feb. 5. Bitcoin has surged around 25% so far this year, reaching a more than two-year high of $52,749 on Thursday.
While Saylor has won the admiration of digital-asset proponents, no other US public company besides Tesla Inc. and a handful of crypto-related firms have decided to hold the volatile cryptocurrency on its balance sheet.
MicroStrategy’s shares have moved in tandem with Bitcoin prices, with equity investors viewing the company as a easier to trade proxy for the cryptocurrency.
The stock has surged more than 500% to around $770 since Saylor decided to hold Bitcoin, outperforming the roughly 60% increase by the benchmark Standard & Poor’s 500 Index during the same period. MicroStrategy rose as high as $1,272 in February 2021.
The company has taken advantage of the price appreciation to raise capital by selling shares and issuing bonds to buy large quantities of Bitcoin. Saylor said in a recent interview with Bloomberg Television that MicroStrategy’s status as a Bitcoin proxy will not be affected by newly launched spot exchange-traded funds since it does not charge a fee while offering a leveraged bet on the digital asset.
MicroStrategy’s Bitcoin holdings are almost double the assets in BlackRock’s ETF, the most successful of the nine new funds launched last month. The Grayscale Bitcoin Trust remains the largest crypto investment vehicle at around $24 billion, though the fund has seen outflows of almost $7 billion since it was converted from a trust. GBTC charges investors a fee of 1.5%, the highest among the 10 US spot ETFs.
And more gains may be on the way soon. MicroStrategy has until the start of 2025 to adopt a change in accounting that will value Bitcoin at market prices. Based on current prices, that could result in a windfall of over $6 billion.
–With assistance from Tom Contiliano and Olga Kharif.
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