The bank of Bitcoin: MicroStrategy's share price rides high on the back of cryptocurrency investment

Deposits $1bn+ real world greenbacks into digital dosh, may borrow to buy more


MicroStrategy, a company once well known for making enterprise software, has extended its investment in Bitcoin, buying 19,452 units of the cryptocurrency for around $1.026bn in cash at an average price of about $52,765 per coin, including fees and expenses.

With users of its "intelligence everywhere" software including Hyatt Hotels, the American Red Cross, and Whole Foods Market, MicroStrategy has decided that Bitcoin was a good bet, at least in terms of finding somewhere to put unused cash. It might even borrow every now and then to feed the crypto-habit, suggested CEO Michael Saylor.

"We will continue to pursue our strategy of acquiring Bitcoin with excess cash and we may from time to time, subject to market conditions, issue debt or equity securities in capital raising transactions with the objective of using the proceeds to purchase additional Bitcoin," he said in a pre-canned statement.

MicroStrategy has been partaking in the habit since last summer, when it bought 21,454 Bitcoin at an aggregate purchase price of $250m, inclusive of fees and expenses, but clearly, that was not enough to sate the appetite. It went back in for more in December, when it hoovered up 29,646 Bitcoin for approximately $650m in real-world dosh.

Cynics among The Register's readership may be quick to point out that, with all this money going into Bitcoin, is it worth investing in software at all?

They might point to its calendar Q4 2020 revenues of $131.3m, a 1.7 per cent drop on the same period a year earlier. Third-quarter 2020 results had, however, offered $127.4m [PDF], a 6.4 per cent increase on a year earlier. Annual revenue has exhibited a steady if undramatic decline in the last three years.

Any suggestion that MicroStrategy's Bitcoin sideline would interfere with the serious business of software investment was dismissed by president and CFO Phong Le.

"MicroStrategy remains dedicated to our enterprise analytics customers and our goal of operating a growing profitable business intelligence company. We believe our Bitcoin strategy, including our Bitcoin holdings and related activities in support of the Bitcoin network, is complementary to our software business, by enhancing awareness of our brand and providing opportunities to secure new customers," he said.

Given the stratospheric rise in cryptocurrency in recent years, it might seem a good bet. But borrowing money and putting it into Bitcoin does not come without its risks.

Bloomberg has calculated that if MicroStrategy bought its most recent Bitcoin before prices hit a low of $45,000 on Tuesday, it could be looking at as much as a $151m loss based on their average purchase price.

Not that such a possibility has affected the company's share price, which is five times the value it was when the Bitcoin strategy first emerged. Clearly, the CEO has an eye for what he will be measured against.

MicroStrategy is not alone in acquiring a taste for crypto-coin. The world's media swivelled its collective heads when earlier this month a $1.5bn investment from electric car maker Tesla caused the value of the currency to spike, although prices crashed again when CEO and space cadet Elon Musk tweeted that the price might be too high, wiping $15bn or so off his personal fortune.

Maybe Musk can afford repeated visits to the crypto-casino. Whether a more prosaic player like MicroStrategy can is far less certain. ®

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