Millionaire Michael Saylor's Enterprise Recently Purchases Preferred Cryptocurrency
Cryptocurrency's (BTC's 1.87%) price has more than doubled this year and is currently touching its all-time high. Some investors might be cautious about joining this surge, but one of Bitcoin's staunchest supporters – MicroStrategy's (MSTR 4.20%) billionaire Executive Chairman Michael Saylor – isn't shying away.
Under Saylor's guidance, MicroStrategy invested its first $250 million in Bitcoin in 2020. By Nov. 10, 2024, its Bitcoin holdings had expanded to 279,420 Bitcoins, with an overall purchase price of $11.9 billion and a market value of $24.5 billion.
MicroStrategy's Bitcoin portfolio makes up about a third of the company's enterprise value of $73.3 billion and roughly 1.4% of Bitcoin's market cap of $1.8 trillion. And it hasn't stopped buying Bitcoin, even as its price has reached new heights. Between Oct. 31 to Nov. 10, it purchased an additional 27,200 Bitcoins for a total of $2.03 billion, at an average price of $74,463. So, why is this software company still so bullish on Bitcoin?
Saylor predicts Bitcoin will reach new heights
Saylor believes Bitcoin's price will reach $100,000 by the end of 2024 and may eventually peak at $13 million over the next 21 years. That staggering price prediction represents a near 15,000% increase from its current price. In an interview with CNBC, Saylor foresees Bitcoin growing from 0.1% of the world's capital to 7% as more financial institutions offer Bitcoin-related services. He also expects Bitcoin to surpass the S&P 500's trading volume due to its open, global, and free approach to the capital markets.
Most of Saylor's wealth is linked to Bitcoin's price. He directly owns 17,732 Bitcoins, worth about $1.6 billion. This represents nearly one-fifth of his estimated net worth of $8.3 billion. Another $6.5 billion is tied to his 9.9% stake in MicroStrategy, the value of which is primarily driven by its Bitcoin holdings, rather than its software business.
Is MicroStrategy's Bitcoin strategy sustainable?
MicroStrategy's transformation into a Bitcoin speculator happened quickly. Before 2020, the company was primarily known as a slow-growth provider of data mining and analytics software. From 2013 to 2023, its annual revenue slipped from $576 million to $496 million as it struggled to keep up with faster-growing cloud competitors like Microsoft and Salesforce. To combat this pressure, Saylor shifted the company's focus toward Bitcoin.
To reinforce its core software business, MicroStrategy has been converting its on-site applications into subscription-based cloud services. It also recently launched its own generative AI platform, MicroStrategy AI, to help companies integrate AI tools into their data applications. These newer cloud and AI initiatives could stabilize its software business and generate more revenue for future Bitcoin purchases.
While its software business doesn't appear impressive in the short term, analysts forecast its revenue will increase by only 1% annually, from 2023 to 2026, and it remains unprofitable on a GAAP basis.
MicroStrategy is losing money due to impairment costs related to its Bitcoin investments, which outweigh the total revenue generated by its software business. It's also taking on more debt and issuing more shares to fund these purchases. As a result, its total liabilities have more than quadrupled since 2020, and the number of MicroStrategy shares has more than doubled over the past four years. The company plans to raise an additional $42 billion ($21 billion through secondary stock offerings and $21 billion by selling fixed-income securities) over the next three years to buy more Bitcoin.
It's an all-in bet on Bitcoin
If you're optimistic about Bitcoin and pessimistic about the U.S. dollar, MicroStrategy could be an appealing bet on Bitcoin's future. If Bitcoin's price soars against the U.S. dollar, the value of its Bitcoin holdings should easily cover its debt. But if Bitcoin's price collapses, MicroStrategy's balance sheet could face issues. Despite the risk, its all-in bet on Bitcoin could potentially propel the company to new heights over the next few years.
MicroStrategy's aggressive Bitcoin investing strategy, led by Michael Saylor, has significantly increased its Bitcoin holdings, currently valued at $24.5 billion, making up a third of the company's enterprise value. With his prediction of Bitcoin reaching $100,000 by 2024 and potentially peaking at $13 million over the next 21 years, Saylor is actively investing more money into Bitcoin, further strengthening MicroStrategy's all-in bet on the cryptocurrency.
