Michael Saylor, co-founder and executive chairman of business intelligence company MicroStrategy, went on a Bitcoin (BTC) buying spree in 2020 that has since paid off in a major way.
Saylor Turns $1 Salary Into $400 Million
According to a Fortune Magazine report, Saylor has reportedly pocketed an estimated $400 million from pre-planned daily sales of approximately 5,000 shares of MicroStrategy.
These stock sales follow the exercise of options granted in 2014 that were set to expire. Notably, MicroStrategy’s (MSTR) stock has doubled this year to an all-time high (ATH) of $1,195, surpassing the record gains of the largest cryptocurrency on the market. For context, at the end of 2014, MSTR was trading around $160.
The report notes that despite concerns that Saylor, as the controlling shareholder, may be selling at the peak, MicroStrategy’s stock’s performance has mitigated such worries among investors.
During a conference call in November, Saylor clarified that he had been paid a mere $1 salary over the past decade and was ineligible for cash bonuses. He explained that exercising the options would enable him to address certain obligations and acquire more Bitcoin for his account.
Lance Vitanza, a managing director at TD Cowen, commented that the media has perhaps emphasized the story more than investors, who acknowledge that Saylor still retains a substantial amount of MicroStrategy’s stock.
However, the premium that MicroStrategy commands over Bitcoin, particularly since the introduction of US spot Bitcoin exchange-traded funds (ETFs) that hold the cryptocurrency, has begun to raise eyebrows.
In March, Kerrisdale Capital Management LLC announced that it was shorting the stock, apprehensive that it was outpacing the surge in the digital asset’s price.
Austin Campbell, an adjunct professor at Columbia Business School and a consultant for blockchain firms, questioned the rationale behind purchasing MSTR at a premium when ETFs are now available.
Campbell described MSTR as a “retail magical belief stock,” similar to Tesla TSLA, which often defies fundamentals and trades on sentiment. Campbell added that while this trend may continue for some time, it is not indefinite.
MicroStrategy’s Bitcoin Play
MicroStrategy reported a first-quarter loss of $53 million. Interestingly, this loss was incurred despite the surge in the value of its Bitcoin holdings.
According to the report, under current accounting rules, the company cannot recognize increases in the value of its Bitcoin holdings, including the nearly 67% jump in the recent quarter.
However, a recently passed accounting rule will require valuing digital assets at market prices, and companies have until 2025 to implement this revision. Instead of adopting the revision for the first quarter, MicroStrategy recorded a $191.6 million impairment loss related to its digital assets.
Since MicroStrategy began purchasing Bitcoin to hedge against inflation, its holdings’ value has risen to approximately $13.5 billion. During the first quarter, the company acquired an additional 25,250 Bitcoin, bringing its total holdings to 214,400 as of April 26.
Jeff Dorman, chief investment officer at Arca, a digital asset management firm, summarized Saylor’s strategy for MicroStrategy as follows: sell equity or debt and use the proceeds to buy Bitcoin. As the value of Bitcoin appreciates, so does the price of MSTR stock, enabling the company to sell more stock or bonds and repeat the cycle.
Currently, BTC is trading at $61,200, down over 7% in the last seven days alone, after several failed attempts to consolidate above higher levels as selling pressure mounts.
Featured image from Shutterstock, chart from TradingView.com