Trade of the Century: How Michael Saylor revolutionised corporate finance with Bitcoin (2024)

Bitcoin hitting all time highs and boasting a staggering 12-month return of 200% has made headlines all around the world. Has any other asset outperformed Bitcoin during the same time? Ladies and Gentlemen, let me present to you MicroStrategy (MSTR); its price has skyrocketed with a remarkable 12-month return of 600%. The financial world stands in awe of its CEO Michael Saylor and his audacious strategy, which is now heralded as "The Trade of the Century." on crypto Twitter.

So who is Michael Saylor? Born on February 4, 1965, Saylor rose to prominence as an American entrepreneur and business executive. Co-founder and executive chairman of MicroStrategy, a leading provider of business intelligence, mobile software, and cloud-based services, Saylor's entrepreneurial journey has been marked by both triumphs and setbacks. In the late 1990s, Saylor emerged as one of the poster boys of the Internet bubble, amassing immense wealth thanks to his stake in MicroStrategy. However, the dot-com bust and some questionable accounting practices led to a restatement of financial results, causing Saylor to fall from the billionaire ranks and fade from public memory.

Michael Saylor's journey into the world of Bitcoin began through a longstanding friendship with Eric Weiss who is the CEO of Blockchain Investment group. Eric is one of the OGs of the space and was full time into Bitcoin. Saylor, preoccupied with running Microstrategy in the hyper competitive software industry, initially remained indifferent to Bitcoin. However, amidst the uncertainties of the pandemic, discussions at Saylor's home during quarantine veered towards politics, economies, and investments. It was during this period of uncertainty in the world that Saylor became receptive to Bitcoin. Recognizing Bitcoin’s potential amid economic upheavals, Saylor eagerly absorbed information about Bitcoin eventually conducting a deep dive into the cryptocurrency. Saylor embarked on his Bitcoin journey, swiftly transitioning from student to teacher as he embraced the digital asset and shared his newfound knowledge with others. Not a man to go away quietly, Saylor came roaring back in 2020 during the Covid lockdowns by announcing his plan to buy enormous amounts of Bitcoin on prime time TV.

At the heart of Saylor's strategy lies a revolutionary approach to corporate finance, characterized by the strategic utilization of debt instruments and voracious appetite to acquire Bitcoin as a store of value. Through meticulous planning and execution, Saylor engineered a financial manoever that has reshaped the landscape of corporate treasuries. Central to Saylor's strategy is the acquisition of cheap debt; MicroStrategy raises millions through debt instruments. At the heart of Saylor's approach is the remarkably low interest rate at which he borrows – substantially less than 1% annually. This favorable rate enables MicroStrategy to access cheap capital, amplifying the impact of its investments.

The dollars raised through debt financing is deployed to purchase Bitcoin, capitalizing on Saylor's belief in the cryptocurrency's long-term potential. By converting cash into Bitcoin, MicroStrategy positions itself to benefit exponentially from the appreciation of the cryptocurrency.

Crucially, the debt repayment mechanism is structured to be "non-callable," providing MicroStrategy with certainty regarding the repayment timeline. This stability insulates the company from the risk of early repayment demands, regardless of market fluctuations. Moreover, the debt repayment is not in cash but in the company's stock (MSTR). This innovative approach incentivizes lenders by offering a premium over the stock's price at the time of debt issuance, ensuring a favorable deal for MicroStrategy.

So has the plan worked? MicroStrategy's strategic accumulation of Bitcoin has propelled the company into a realm of unprecedented growth, with its recent acquisition of two batches totaling 25,000 Bitcoins at an average price of $33,000 each. As Bitcoin's value surged, these holdings appreciated significantly, reaching an estimated worth of $14.8 billion. This remarkable increase represents more than a doubling of the company's previous asset value. Consequently, MicroStrategy's shares experienced a substantial uptick, mirroring the exponential rise in Bitcoin's price.

Saylor's strategic brilliance extends beyond mere financial engineering – it could represent a paradigm shift in the way corporations manage their balance sheets. By pioneering the integration of Bitcoin into corporate treasuries, Saylor has not only positioned MicroStrategy for long-term success but has also paved the way for other companies to follow suit.

As Saylor continues to lead MicroStrategy into uncharted territory, his legacy as a visionary leader and master strategist is firmly cemented in the annals of financial history. "The Trade of the Century" serves as a testament to Saylor's ingenuity and foresight, leaving an indelible mark on the corporate world for generations to come.

(The author is Vice President, WazirX)

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