Michael Saylor’s 2020 decision to start buying Bitcoin has paid in spades this year for the co-founder and executive chairman of MicroStrategy Inc.
Saylor raked in about $400 million from pre-planned daily sales of about 5,000 shares of the business software company between January and last week, based on data compiled by Bloomberg. The share sales follow the exercise of options granted in 2014 and which are expiring. The stock has doubled this year to around $1,290, surpassing the original cryptocurrency’s record gains during the same period. At the end of 2014, MicroStrategy was trading at around $160.
The outperformance of shares of Tysons Corner, Virginia-based MicroStrategy appeared to allay investors’ fears that Saylor, which is the majority shareholder, might sell high. During conference call in November, Saylor pointed out that for more than a decade he had received a $1 salary and was not eligible for any cash bonuses. Exercising the option will allow him to fulfill certain obligations as well as purchase more Bitcoin for his own account, he said at the time.
“I think it’s a bigger story in the media than among investors,” said Lance Vitanza, managing director at TD Cowen, who has a “buy” recommendation on MicroStrategy. “Investors recognize that Saylor still owns a lot of stock.”
Even so, the premium that MicroStrategy commands over Bitcoin following the January introduction of US exchange-traded funds that can hold the cryptocurrency is starting to raise eyebrows. In March, Kerrisdale Capital Management LLC said it short circuit the stock as it exceeded the rise in the price of the digital asset.
“To me, the biggest question is why would you buy MSTR at a premium to spot when you can now just buy ETFs? said Austin Campbell, assistant professor at Columbia Business School and consultant for blockchain companies. MicroStrategy “is a retail magic belief stock, like PLTR, TSLA, or GME. They tend to defy fundamentals and trade based on vibes alone. This may last for a while, but not forever.
Meanwhile, MicroStrategy said Monday it posted a $53 million loss in the first quarter after suffering a depreciation in the value of its Bitcoin holdings, even as the cryptocurrency surged during the period.
Under current accounting rules, MicroStrategy cannot recognize any increase in its Bitcoin holdings, such as the nearly 67% jump over the last quarter. This is changing under a recently adopted accounting rule that requires the digital asset to be valued at market prices. Companies have until 2025 to implement the review. MicroStrategy did not adopt the revision for the first quarter, but recorded an impairment loss of $191.6 million for digital assets.
The value of MicroStrategy’s Bitcoin holdings has increased to around $13.5 billion since the company began purchasing the digital asset as part of its inflation-hedging efforts.
The company’s Bitcoin cache has increased by 25,250 since the end of the fourth quarter. MicroStrategy held 214,400 Bitcoins as of April 26, it said.
“Saylor has a simple strategy for MSTR: sell equity/debt and buy BTC with the proceeds,” said Jeff Dorman, chief investment officer at Arca, a digital asset management company. “As BTC goes up, MSTR shares go up, so MSTR can sell more stocks/bonds and start again.”
