Software intelligence firm MicroStrategy made one of the boldest investment moves of the year when it invested $250 million into bitcoin, buying about 0.1 percent of the total supply in August. Its CEO, Michael Saylor, has doubled down on the move in countless public comments and earlier this month, the firm raised $650 by offering convertible senior notes with plans to buy even more BTC.
But these moves cannot be made by Saylor alone. The company’s board and investors must also see the value in a transition to bitcoin. But who are these bullish investors? How did Saylor convince them to opt into Plan B? And what does it mean for there to be a cadre of Bitcoin enthusiasts in these institutional seats?
Who Are The Investors Backing Saylor’s Big Play?
Russell Investment is the eight-largest shareholder in MicroStrategy, owning approximately 2 percent of total shares. It has recently increased this position by over 70 percent, more so than any other shareholder. It has bullishly blogged on BTC since 2018, with such quotes as: “While many are questioning Bitcoin’s foundations, perhaps even more importantly, Bitcoin is questioning the foundations of the central banks.”
Renaissance Tech (RenTech) is the tenth-largest shareholder in the company. It has increased its position by four-times since June, which coincidentally, is when it also received internal approval to begin trading bitcoin futures.
This approval was around the time when MicroStrategy publicly stated that it was considering investing in alternative assets. At this point, we can infer that RenTech knew that bitcoin was on the table and was onboard with the idea.
My personal favorite? The Citron Fund. It was publicly bearish on BTC for three years before reversing its position this Fall, saying in an investment memo that MicroStrategy was the best Bitcoin exposure available on the public market today.
Citron bought up shares in MicroStrategy and stated a new valuation of $700 per share. This is a roughly 145 percent increase from the current price of $286.
BlackRock has decreased its total position by about 5 percent, but remained the largest overall shareholder at 15 percent. They’re also the world’s largest asset manager, managing over $8 trillion. Its chief investment officer said just last month that “Bitcoin is here to stay.”
Its CEO went even further, saying that Bitcoin could replace gold.
How Have These Investors Been Convinced?
Saylor said it was an approximately six-month process for approval for the move into bitcoin. Six months. To allocate $250 million into bitcoin. At a minimum, I would have expected 12 months.
Saylor has the majority voting shares and, at the end of the day, what he says goes. But it is also unlikely that he would push through such a massive policy change without significant support. So how did Saylor convince the board and shareholders to support the move?
First, they were already open to it. Russell had been blogging since 2018, RenTech had already documented recent interest in bitcoin trading. The fast timeline implies others were also curious. They don’t want to miss the boat and the fact that Bitcoin has survived for 12 years shows that it’s not just a fad.
Second, education on Bitcoin was pivotal. Saylor has stated that this was part of the process and it shows. MicroStrategy has an entire section of its website dedicated to Bitcoin materials. And that education continues. On the “Investor Analyst Day” last month, Saylor answered 25 questions during a Q&A. Ten of them were Bitcoin centered.
Finally, there are a lack of other options. Many investment funds have governing charters that don’t allow them to invest in cryptocurrencies. For others that are able to invest, they’ve cited concern over custody and security. Basically, every fund is allowed to invest in stocks, but with the Grayscale Bitcoin Trust (GBTC) — the preeminent trust giving exposure to the price of bitcoin through a traditional investment vehicle — you pay a premium to the price of bitcoin. MicroStrategy is the best of both worlds.
TL;DR: BlackRock, Russell and RenTech all likely gave their blessing in the switch to bitcoin. If MicroStrategy proves a success, they could use Saylor's playbook to advocate for BTC at their other portfolio companies too.
This is a guest post by Ellie Frost. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.