Michael Saylor, a micro-strategy boss who turns over by betting on Bitcoin

Author: Gregory Zuckerman

Compiled by: Luffy, Fore sight News

Michael Saylor's company has not launched any popular products or services. What he and MicroStrategy did was to issue new shares and bonds at a rare rate in corporate history, then put all the money into Bitcoin, and vowed to do so repeatedly.

MicroStrategy's share price has risen about 690% over the past year. The 59-year-old executive chairman owns about 10% of the company, worth about $9.7 billion, and he personally holds about $1.9 billion worth of Bitcoin.

Saylor has become a public representative of the recent Bitcoin boom, with nearly 4 million followers on X platform (formerly Twitter). To celebrate Bitcoin’s price of over $100,000, Saylor hosted a New Year’s Eve party at his luxury home in Miami’s Waterfront, inviting hundreds of members of the cryptocurrency community, whose luxury yacht was docked nearby. At the party, six dancers in golden costumes danced gracefully. Celebrities and big names in the investment industry gathered together, including former fund manager Bill Miller, Fortress Investment Group chairman Peter Briger, and Mark Casey, key portfolio manager of Capital Group. The event was broadcast live to tens of thousands of Bitcoin enthusiasts via YouTube, with Saylor hosting the party in a black blazer and a Bitcoin-themed T-shirt.

The enthusiasm for Saylor is so high that there is a puzzling situation: MicroStrategy holds about $47 billion worth of Bitcoin, but its stock market cap reaches $97 billion. It's like an investor spends $2 to buy a bill worth $1. It is also surprising: experienced investors are actually one of the biggest buyers, including the strong mutual fund company Capital Group, which owns approximately 8% of MicroStrategy as of September 30, and Norwegian sovereign wealth fund Norwegian Bank Investment Management, which manages $1.5 trillion assets, holds nearly 1% of MicroStrategy.

Fans said the premium reflects their belief that Saylor can continue to make profits through its bets on Bitcoin. They believe that the total amount of Bitcoin is limited to 21 million, and this scarcity will increase its value. SYZ Capital partner Richard Byworth, who personally owns MicroStrategy shares, said Saylor is able to create value for shareholders while expanding MicroStrategy's Bitcoin reserves by issuing shares at a high price and selling bonds to the company on preferential terms.

"This premium is reasonable and will always be there," said Jordi Visser, a Wall Street veteran who worked at Morgan Stanley, who recently bought stock in MicroStrategy. "No company can do what he does." . They have about 2% of the Bitcoin supply, who else can have more? ”

However, Saylor's strategy comes with huge risks. He has been ups and downs in the wave of investment until it reaches its peak and sometimes loses billions of dollars in personal wealth within a day.

Saylor declined to comment on this article.

Saylor is unmarried for life and will be 60 next month. He has experienced setbacks in his career and has also had conflicts with financial regulators and others. Last year, he agreed to pay $40 million to Washington, D.C. to settle an income tax dispute. Previously, Washington officials said he actually lives in the D.C. rather than what he claims to be Florida or Virginia, so he should pay taxes on the D.C.

Saylor's father is a professional Air Force officer. Saylor studied aviation and science at MIT and participated in the Air Force Reserve Officer Training Team. A few years after graduation, in 1989, he founded MicroStrategy, a data mining software company, in Tysons Point, Virginia, with his college friends.

During the late 1990s, MicroStrategy rose rapidly. Saylor's shares are worth about $10 billion, enough for him to host luxury parties for employees and others, and to organize a Caribbean cruise. MicroStrategy also purchased domain names including Mike.com, Michael.com, Hope.com and Voice.com, and sold Voice.com for $30 million.

But when the Internet bubble burst in 2000, everything collapsed. MicroStrategy was forced to redeclare its revenue and earnings as regulators reviewed the way the industry earnings were recorded. This devastating defeat was extremely dramatic and even attracted the attention of the tabloids: In March of that year, the New York Daily News published a report titled "A loss of $6 billion per day" and was accompanied by Saylor, who was 35 years old at the time. In the photo, he has a neat face, a suit and tie, and a blank look on his face.

Saylor has always been a public figure in Bitcoin, the picture above shows him speaking at a meeting in 2023

Later that year, Saylor and two other executives and the company paid $11 million to settle allegations of accounting fraud filed by the Securities and Exchange Commission for financial recapitalization. The SEC said the company exaggerated revenue and earnings, showing profits rather than losses, but Saylor and others neither acknowledged nor denied the allegations.

In July 2002, MicroStrategy's stock closed at 45 cents, a sharp drop from its 2000 high of $313, and the company also faces debt problems.

While having lunch at the Hampton Villa in Bridgehampton, venture capitalist Rick Rickertsen expressed sympathy to Saylor and asked him if he was worried about losing his company.

"It's possible," Saylor said, "but I'll start over."

Saylor restructured MicroStrategy's debt and implemented a 10-to-1 reverse stock split to avoid the crisis. For years, Saylor has been looking for the next big opportunity. For a time, he made considerable personal gains by investing in stocks such as Google and Apple, but he was disdainful of Bitcoin. In 2013, he said on Twitter that Bitcoin "has no time left."

By 2020, MicroStrategy's share price has barely changed over the years and its growth prospects are slim. The company's market value is only US$1.5 billion, but the company is still profitable and has about US$500 million in cash.

During the 2020 COVID-19 pandemic, Saylor was thinking about how to dispose of the company’s cash at home in Miami. Fearing that the government's massive spending could trigger inflation to maintain economic stability, Saylor re-studyed Bitcoin and became a staunch supporter of it. Soon, he proposed to the board of directors to buy bitcoin with cash, and the board agreed, mainly because the company doesn't seem to have a better option. They believe that at least this move will attract some useful attention.

"The company was no progress at the time, with little attention from Wall Street," said Rickertsen, who later became a member of the company's board of directors, "the prospects were bleak."

That year, Saylor took out half of the company's cash, about $250 million, and bought Bitcoin at about $11,000 per coin. He himself invested more than $100 million. However, the price of Bitcoin fell to $9,000 immediately, and MicroStrategy lost about $40 million on the books.

"Most of our board members said, 'Oh my goodness, what we did, we're going to be sued,'" Rickertsen said. "Saylor was worried, too."

This panic did not last long. Bitcoin price began to climb, breaking through $26,000 by the end of 2020. MicroStrategy borrowed billions of dollars to buy more bitcoins, one of which was a floating rate loan of $205 million at 8.27%, which was a challenging loan term at the time.

Then, cryptocurrency exchange FTX collapsed at the end of 2022, with Bitcoin falling below $17,000, and MicroStrategy's stock price also fell to about $17. The company's cost of Bitcoin is about $30,000, so it has suffered a book loss. Rumors spread, saying the company was in trouble. But Saylor and the company have increased their bets.

As Saylor increases its strategy to buy Bitcoin by offering stocks and bonds, and the price of Bitcoin continues to rise, the company's stock price begins to soar. In 2024 alone, MicroStrategy raised $23.2 billion through stock and bond sales, according to Mark Palmer, an analyst at investment bank enchmark Company.

Saylor's propaganda may be somewhat repetitive and simple, but his belief in Bitcoin is always firm. He stressed that the supply of Bitcoin is limited, which is different from the US dollar or even gold. Saylor believes this makes Bitcoin perform better in resisting inflation. He also said that the digital nature of Bitcoin makes it easier to store and use by its holders, and it is a "revolutionary" form of currency without intermediaries.

Some mutual funds and other institutions have internal regulations prohibiting the purchase of Bitcoin and Bitcoin ETFs, so MicroStrategy's stock has become an indirect way for them to place bets on Bitcoin. Even some large conservative investors see the stock as a potential way to gain an advantage over competitors who are reluctant to get involved in cryptocurrencies.

Saylor has proven to be good at creating different types of equity and debt investment products such as bank loans, convertible bonds, common stocks, and more to ensure a steady flow of funds.

“What makes him stand out is to create different products for different audiences,” said Brett Messing, an executive at Sky Bridge Capital, which manages funds that invest heavily in Bitcoin and advise a fund holding MicroStrategy stocks. .

Over the past month or so, Saylor has been promoting MicroStrategy and Bitcoin on TV shows, well-known podcasts, industry conferences and other occasions. "If you don't buy Bitcoin at a high level, you're missing out on making money," he recently tweeted.

“He speaks passionately in public and more meticulous in private,” said Matt Hougan, chief investment officer at crypto asset management firm Bitwise, who listened to Saylor at a dinner with 12 investors last summer Have a speech. His company manages an ETF holding MicroStrategy stock.

If the price of Bitcoin continues to rise, the premium of holding MicroStrategy stock may continue to exist. However, if Bitcoin price plummets, MicroStrategy's stock price may also fall. Even if the premium disappears, its share price may be affected as long as the price of Bitcoin remains stable. Skeptics point out that some similar investment vehicles, such as closed-end funds, often trade at prices below the value of their holdings, rather than at the premium.

However, the company may not face an existential crisis. MicroStrategy currently has $7.26 billion in unsecured debt, most of which are issued at extremely low interest rates. The company holds 450,000 Bitcoins, with an average cost of about $62,000. The value of Bitcoin held by a company will be lower than its debt only when the price of Bitcoin falls below $16,000 and remains near that level when the debt matures.

Just over a week ago, Saylor unveiled a whole new way to enable MicroStrategy to raise funds from investors to support its Bitcoin purchase program. He announced that the company will sell $2 billion in "sustainable preferred stock" in the quarter. The news prompted analyst Palmer to reiterate his target price for MicroStrategy stock at $650, which is about 65% higher than the current share price.