‘Preying on investors’: how software firm MicroStrategy’s big bet on bitcoin went stratospheric
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Firm’s share price has risen twentyfold after it changed its strategy to become first ‘bitcoin treasury company’. In the summer of 2020, as the Covid-19 pandemic upended economies around the world, an obscure US software firm decided to diversify. MicroStrategy, whose head office is situated next to a shopping mall and metro station in Tysons Corner, Virginia, had decided the steady business of “software as a service” was not racy enough.
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Instead, it would branch out by investing up to $250m in alternative assets – “stocks, bonds, commodities such as gold, digital assets such as bitcoin or other asset types”. Less than five years later, that bitcoin side hustle has gone stratospheric. MicroStrategy’s share price has swollen twentyfold, lifting its market capitalisation to almost $75bn and catapulting the stock into the Nasdaq 100 index of top technology shares.
The audacious bet by its co-founder and chair, Michael Saylor, has made MicroStrategy a top pick with UK investors, as digital currencies and tokens were boosted by Donald Trump’s election victory, despite worries that a sharp reversal in crypto prices could threaten its survival.
Saylor’s strategy evolved into the world’s first “bitcoin treasury company”, with MicroStrategy pursuing a seemingly relentless approach of buying up bitcoin, funded by issuing billions of dollars of bonds and new shares. The company’s fans call this process a flywheel, in which issuing debt to buy bitcoin boosts the MSTR stock, allowing it to issue more shares to raise funds to buy more bitcoin.
