Forbes has recognized Michael Saylor, founder and CEO of MicroStrategy, as a key figure in the world of Bitcoin, highlighting his investment strategy and impact on corporate and institutional adoption of the cryptocurrency.
Forbes’ recent cover of Michael Saylor’s “Bitcoin Alchemist” highlights his growing influence in the cryptocurrency world and the impact of his innovative Bitcoin-based investment strategy.
With this edition, Forbes is praising the bold investment strategy that has transformed MicroStrategy and, to a large extent, driven corporate and institutional adoption of cryptocurrency around the world.
The story of the company and its founder and CEO is a fascinating tale of vision, calculated risk and a deep understanding of financial markets, which has redefined the role of business in the world of cryptocurrencies and digital assets.
MicroStrategy: From creating enterprise software to pioneering the corporate revolution with Bitcoin
Before its foray into the world of Bitcoin, MicroStrategy was a software company with moderate growth and a market capitalization of around $1.000 billion. For two decades, the company sailed in calm waters, but without any major revolutions.
However, as Forbes reports, Everything changed in 2020, when Saylor decided to bet everything on Bitcoin, making it MicroStrategy's core strategy. This decision, considered by many to be radical, has become the engine of exponential growth, which has catapulted both the company and its CEO to fame.
The SEC's approval of Bitcoin ETFs, following funding applications from giants like BlackRock and Fidelity last year, was a key catalyst for Bitcoin's price. Its price skyrocketed, more than doubling in 12 months and surpassing $100.000 in early December. However, in addition to the spot ETF approval, corporate adoption of Bitcoin has also been driven by massive purchases made by MicroStrategy over the past 4 years. Several companies, including Metaplanet, Riot Platforms, Marathon Holdings, KULR Technology y Critical Metals, among others, have stated that their entry into the world of Bitcoin has been motivated, and even inspired, by MicroStrategy's strategy and its proven success. To date, Michael Saylor's company has achieved a Unrealized gain of $34.110 billion, with its strategic investment in Bitcoin.
Also before Christmas, MicroStrategy joined the Nasdaq 100, thanks in part to the success of its innovative cryptocurrency strategy. The company's entry into this index sparked increased demand for its shares, with the stock up more than 700% in the past year.
MicroStrategy's stock surge was also fueled by debt issuance and continued Bitcoin accumulation, eventually holding 471.107 bitcoins to dateWith this amount, MicroStrategy has become the largest holder of this cryptocurrency outside of its mysterious creator, Satoshi Nakamoto, who is believed to own around one million BTC.
By 2024, Saylor's personal fortune had skyrocketed from $1.900 billion to $7.600 billion, reaching $9.400 billion a month later.
Source: Saylortracker
The meteoric rise of Bitcoin to MicroStrategy has sparked intense debate. According to Forbes, critics and short sellers have questioned how a small software company with $48.000 billion worth of Bitcoin assets could reach a market capitalization of $84.000 billion. However, The key to her success lies in Saylor's ability to simultaneously navigate two worlds.: the one of the traditional finance, where companies issue debt and equity that is traded by hedge funds, traders and institutions; and that of the Bitcoin universe, governed by an unwavering faith in a future driven by this cryptocurrency.
“Cryptocurrency [Bitcoin] is something of a second coming for Saylor, given that he made and lost more than $10.000 billion during the dot-com bubble”, Forbes commented.
Saylor's secret to attracting capital in the crypto era
Saylor’s strategy relies on Bitcoin’s inherent volatility. While this characteristic of the cryptocurrency is seen as a risk by traditional investors, for Saylor it is an advantage. Volatility attracts options traders, hedge funds and retail speculators, which has made MicroStrategy one of the most active stocks on the market. Thus, despite its relatively modest annual revenue of $496 million, its daily trading volume rivals that of the tech giants in the “Magnificent 7” group, which includes Meta, Apple, Alphabet, Microsoft, Amazon, Tesla and Nvidia.
"People think it's crazy," Saylor said. “How can such a small company have so much liquidity? It’s because we have put a ‘crypto reactor’ at the heart of the company, we attract capital and spin it up. That introduces volatility into the capital and makes our options and convertible bonds the most interesting and profitable on the market.”
The issuance of $7.300 billion in convertible bonds beginning in 2021 is a perfect example of Saylor’s strategy implemented at MicroStrategy.
Bitcoin’s constant price movements amplify MicroStrategy’s stock price in real time, increasing the implied volatility of the call option inherent in these bonds. Unlike traditional bonds, convertibles offer security to debt holders, with the option to exchange their bonds for MicroStrategy stock at predetermined prices until maturity. BTC’s high implied volatility increases the value of the option, allowing Saylor to issue convertible debt at near-zero interest cost.
Forbes highlighted that the six convertible bonds issued by MicroStrategy, with maturities between 2027 and 2032, have interest rates ranging from 0% to 2,25%. In government bond markets, where liquidity has been tight due to the private credit boom, institutional investors are looking for additional yields. As such, MicroStrategy's bonds not only represent one of the few ways for large investors like the German insurer to Allianz y State Street can invest in digital assets, but they have also been one of the best performers in the market, with returns of over 250% since issuance.
Even the $3.000 billion five-year bonds issued by MicroStrategy in November, with a 0% coupon and a strike price of $672 (80% above MicroStrategy's current share price), have risen 89% in just a few months, he said.
MicroStrategy revolutionizes the market with its convertible bond strategy
According to Forbes, Michael Saylor understands that institutional investors, measured by quarterly benchmarks, will continue to buy his bonds to boost their portfolio returns.
The massive issuance of convertible bonds, although it normally dilutes a company's shares, in this case has had a bullish effect, as bonds represent future demand for stock at ever-higher prices. Through secondary offerings and convertible issuances, MicroStrategy’s outstanding shares have increased from 97 million to 246 million since 2020. Over the same period, its shares have appreciated by 2.660%. In late January, its shareholders voted to significantly increase the company’s authorized shares to 10.300 billion, and in this context, the cycle feeds itself: issuing billions in debt and equity at low or no cost, driving up Bitcoin prices with large purchases, and catapulting MicroStrategy’s hyper-volatile stock, the publication noted.
Richard Byworth, a former convertible bond trader at Nomura and managing partner at Zurich, Switzerland-based Syz Capital, said MicroStrategy and Saylor “have found a currency flaw in the financial markets that they are taking advantage of.”
BTC Yield: Measuring Bitcoin Growth at MicroStrategy
Saylor has created a new financial metric, the “Bitcoin Yield” or “BTC Yield,” which simply measures the percentage change in the ratio of a company's Bitcoin holdings to its fully diluted shares over timeThis metric, according to Forbes, serves as a marketing tool to attract followers.
Ben Werkman, a former merchant banker, consultant and early investor in the company’s Bitcoin strategy, said that trying to value MicroStrategy in a traditional way is an exercise in futility. Instead, Werkman explained that Saylor has turned off bottom-line thinking and has chosen to focus on leveraging Bitcoin’s strength on its balance sheet.
Also in October last year, Michael Saylor unveiled the so-called “21/21” plan to raise a staggering $42.000 billion, half through equity and half through debt, over the next three years to buy more Bitcoin. In November and December alone, the company acquired nearly 200.000 bitcoins worth approximately $18.000 billion.
This model implemented by the company has been Simply brilliant, making MicroStrategy uniquely “the most liquid source for trading Bitcoin-related risks, both in the spot market and, more importantly, in the options market,” Forbes said.
So while there are obviously risks to its strategy, unless it's a true apocalypse, MicroStrategy should be fine. According to the publication, the price of Bitcoin would have to fall by more than 80% from its current level of more than $105.000 dollars and stay that way for at least two years so that MicroStrategy cannot meet its current debt obligations. At this point, Saylor has again demonstrated his ingenuity in exploiting capital markets and the behavior of bond investors.
Michael Saylor ushers in a new financial era
In short, Michael Saylor is not just a recognized name in the business world. Rather, he has become an emblematic figure in the cryptocurrency universe, particularly in the area of corporate Bitcoin adoption. His bold bet on the world’s leading cryptocurrency has not only transformed the trajectory of his enterprise software development company, but has also inspired other companies to consider Bitcoin as a strategic asset.
Jeff Park, head of alpha strategies at Bitwise, stated that “there is actually very little debt on MicroStrategy’s balance sheet,” noting that a forced liquidation of MicroStrategy’s Bitcoin holdings It would be unlikely because institutional bondholders have a high tolerance for refinancing, even in the worst-case bankruptcy scenarios.
Considering this, the post concludes with a crucial question: What's stopping other companies from copying Saylor's Bitcoin-powered financial engineering? The answer is a simple nothing, which is why many are already starting to do exactly that, he said. According to Park, Bitwise has about 90 public companies, including household names like Tesla and Block, that have added Bitcoin to their balance sheets.
In 2020, MicroStrategy made the strategic decision to invest in Bitcoin, becoming one of the first public companies to adopt this strategy. Now, almost 5 years later, its story is Proof that innovation, calculated risk and a long-term vision can generate extraordinary results, even in a market as volatile as that of cryptocurrencies.
Michael Saylor's vision has transformed MicroStrategy and left an indelible mark on the history of Bitcoin, becoming a true alchemist able to transform risk into a substantial return for its company and its investors. Now, the question that remains in the air is Whether his model will be replicated on a large scale or will it remain a singular exception in financial history?. Based on the steps being taken by companies like Metaplanet, Riot Platforms and others, it seems that there is a common interest in adopting their strategy and redefining the financial landscape as we know it.
