Michael Saylor, co-founder and executive chairman of business intelligence company MicroStrategy, has opted for Bitcoin (BTC) shopping spree in 2020, this has since paid off in a big way.
Saylor turns his $1 salary into $400 million
According to a Fortune magazine reportSaylor reportedly pocketed about $400 million from pre-planned daily sales of about 5,000 shares of MicroStrategy stock.
These share sales follow the exercise of options granted in 2014 and which are expiring. Notably, MicroStrategy (MSTR) stock has doubled this year to an all-time high (ATH) of $1,195, surpassing record gains for the market’s largest cryptocurrency. For context, at the end of 2014, MSTR was trading around $160.
The report notes that despite concerns that Saylor, as the majority shareholder, might sell off at the high end, MicroStrategy’s stock performance has eased those concerns among investors.
During a conference call in November, Saylor clarified that he had only received a $1 salary over the past decade and was not eligible for cash bonuses. He explained that exercising the options would allow him to fulfill certain obligations and acquire more Bitcoin for his account.
Lance Vitanza, chief executive of TD Cowen, said the media may have focused on the story more than investorswho acknowledge that Saylor still owns a substantial amount of MicroStrategy stock.
However, the premium that MicroStrategy imposes over Bitcoin, especially since the introduction of spot Bitcoin in the United States exchange traded funds (ETFs) that hold the cryptocurrency, has started to raise eyebrows.
In March, Kerrisdale Capital Management LLC announced it was shorting the stock amid concerns it would outpace the digital asset’s price increase.
Austin Campbell, an assistant professor at Columbia Business School and a consultant to blockchain companies, questioned the rationale for buying MSTR at a higher price when ETFs are now available.
Campbell described MSTR as a “magic retail belief stock,” similar to Tesla TSLA, that often defies fundamentals and trades based on sentiment. Campbell added that while this trend may continue for a while, it is not indefinite.
MicroStrategy’s Bitcoin game
MicroStrategy reported a first-quarter loss of $53 million. Interestingly, this loss occurred despite the rise in the value of his Bitcoin holdings.
According to the report, under current accounting rules, the company cannot recognize increases in the value of its Bitcoin holdings, including almost all Bitcoin assets. 67% jump during the last quarter.
However, a recently adopted accounting rule will require digital assets to be valued at market prices, and companies have until 2025 to implement this revision. Instead of adopting the revision for the first quarter, MicroStrategy recorded an impairment loss of $191.6 million related to its digital assets.
Since MicroStrategy started buying Bitcoin to protect against inflation, the value of its holdings amounts to approximately $13.5 billion. During the first quarter, the company acquired 25,250 additional Bitcoins, bringing his total holdings to 214,400 as of April 26.
Jeff Dorman, chief investment officer at Arca, a digital asset management company, summarized Saylor’s strategy for MicroStrategy as follows: sell equity or debt and use the proceeds to buy Bitcoin. As the value of Bitcoin appreciates, the price of MSTR stock also rises, allowing the company to sell more stocks or bonds and repeat the cycle.
Currently, BTC is trading at $61,200, down more than 7% in the last seven days alone, after several failed attempts to consolidate above higher levels as selling pressure increases.
Featured image from Shutterstock, chart from TradingView.com
