Demystifying MicroStrategy: A listed company that spent $400 million to buy Bitcoin

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If a listed company invested in Bitcoin, is it good or bad for the stock price?

In August of this year, a traditional industry giant MicroStrategy Inc. (hereinafter referred to as MicroStrategy) suddenly announced that it would adopt a new fiscal reserve policy and will continue to use Bitcoin as the main fiscal reserve asset. In the following month, MicroStrategy did what it said and spent nearly $400 million to purchase about 38,250 bitcoins.

This news is drowning in the prosperity of DeFi in the currency circle. Everyone does not seem to realize that this is the world’s first publicly listed company that publicly announces Bitcoin as an asset allocation.

What’s even stranger is that this company seems to have nothing to do with Bitcoin. Searching for the keywords of MicroStrategy and Bitcoin on the Internet did not see any connection between the two before; in the past tweets of founder Michael J. Saylor, there were almost no comments related to Bitcoin.

How did this technology company established in 1989 become a strong member of the Bitcoin army?

From Air Force to Entrepreneurship

In February 1965, Michael J. Saylor was born into an air force family in Lincoln City, USA. His father was the chief sergeant of the air force. Under the influence of his family, Michael also began to take the air force.

At the age of 18, Seiler, who was awarded an Air Force ROTC scholarship, entered MIT to study. A few years later, Seiler received a double degree in aerospace and computer science and graduated successfully. However, due to physical reasons, the Air Force did not become Saylor’s final destination.

In 1988, the 24-year-old Saylor became an internal consultant for DuPont. He spent nearly two years helping DuPont develop a computer model, which was used by DuPont to predict market changes and company development. Happening.

DuPont is now the second largest American chemical company in the world. DuPont was founded in 1802. During the First World War, it had done arms business and accumulated a lot of funds. In 2015, DuPont Chemical and Dow Chemical merged, and the new company was named DowDuPont (DowDuPont), becoming the second largest chemical company in the world after BASF. DuPont’s current business scope is very wide, covering many fields such as food, health care, clothing, home furnishing, construction, electronics and transportation.

During the development of the model, Thaler discovered a business opportunity: there seems to be a lack of professional tools and data analysis companies in the market that can help companies conduct business investigations and market forecasts. So while helping DuPont develop the model, the ambitious young man decided to start his own business. He persuaded his old club DuPont to give him $250,000 in financial support.

Establishment of MicroStrategy

In 1989, MicroStrategy was established with the funding of the old company and the support of MIT students. After some exploration in the market, MicroStrategy ushered in a key customer: McDonald’s.

McDonald’s hopes that MicroStrategy will develop an application that can be used to analyze the efficiency of various McDonald’s promotions and give a quotation of 10 million US dollars. The benefits of this program are unexpected and even win-win: McDonald’s has discovered the preferences of diners, and for Party B’s MicroStrategy, it has also explored a new to B direction.

It is the cooperation with McDonald’s that makes Sayler realize that the market potential of enterprise data is huge, and companies can use the intelligent business software they have developed to use data to analyze their business and make optimal decisions.

Since then, MicroStrategy, which has launched the to B intelligent business software business, has gone smoother and smoother on the road to entrepreneurship. From 1994 to 1997, MicroStrategy’s revenue doubled every year.

The well-known underwear brand “Victoria’s Secret” was also one of MicroStrategy’s customers. Through data mining and analysis, MicroStrategy helped Victoria’s Secret discover the preferences of American women in underwear choices: women in New York prefer to buy black underwear, while women in the Midwestern United States tend to have larger underwear sizes. Helped Victoria’s Secret to save inventory costs while also increasing sales.

In the late 1990s, MicroStrategy continued to expand under the leadership of Thaler. He has always believed in the theory of “being prepared for danger in times of peace”. Thaler believes that MicroStrategy is not a seller of data mining software, but a provider of “intelligence”. Just like Bill Gates’ mission at Microsoft is not just to let Microsoft sell a bunch of software for personal computers, its ultimate The goal is to install one computer on each desktop.

MicroStrategy, which has found its core business, is on the right track. In June 1998, 9 years after the company was established, MicroStrategy started the IPO with an initial public offering of 4 million shares at a price of $12 per share. On the first day of trading, the stock price doubled.

At the time of the IPO, Seiler retained 73.1% of the company’s shares (co-founder Banal held another 12%). Seiler’s extremely high shareholding ratio is also due to his strong desire to control the company. He is unwilling to provide any ownership shares to outside investors, especially venture capitalists. He has publicly stated that he hates venture capitalists. He worried that venture capitalists or other big investors would “play down the company’s vision.”

Within a few months after the Nasdaq struck the bell, the market value of Seller’s newly established company MicroStrategy Inc. surpassed the market value of its former employer, 198-year-old DuPont. With the soaring stock price, Thaler’s net worth reached 7 billion US dollars. In the eyes of “Washington Magazine”, he is already one of the wealthiest people in Washington, DC.

But no one thought that listing became the last highlight of MicroStrategy.

Change the world

Soon after listing, MicroStrategy was investigated by the SEC for allegedly falsifying revenue data. MicroStrategy subsequently admitted that its 1999 revenue was 25% less than previously claimed, and that it was in fact at a loss in 1999.

Just like Luckin, the data difference is so big that it is almost a devastating blow to a listed company. The news quickly fermented and MicroStrategy’s stock price plummeted 62%. Seiler lost $6 billion in one day.

However, the SEC episode did not seem to have any impact on Thaler, he did not care about the evaporation of these billions of dollars. He insisted that his company did nothing wrong, and in his own description, he believed that he was changing the world.

He compares himself to Thomas Edison, Henry Ford, Andrew Carnegie and John D. Rockefeller. When you are busy changing the world, who cares about billions of dollars in losses? “I have never seen anyone so obsessed with changing the world.” MicroStrategy spokesperson Mark Bisnow commented on Saylor.

Rhythm note: Mark Bisno, who was an assistant to Congressman John Anderson and Senator Robert J. Dole, was hired by Thaler as his personal publicist in April 1998 , That is, the chief of staff in the formal sense. In Thaler’s words, Bisno’s mission is to “bring me to the right people.”

But not everyone can become an Edison.

From 2000 to 2020, although MicroStrategy still insists on launching a new generation of products and services, it also sells some products and services. But there is no new breakthrough that Wall Street applauds. On December 29, 2000, after MicroStrategy’s stock price reached an astonishing $3,330, it began a sharp decline. In the following 20 years, MicroStrategy’s stock price rarely returned to $200.

In 2014, MicroStrategy was determined to reorganize. In October 2014, MicroStrategy laid off 770 employees, equivalent to 20% of its employees. In November of the same year, Seiler reduced his annual salary from 875,000 to $1 and canceled dividends.

But this cannot change the decline of MicroStrategy. Thaler’s tweet interactions are very bleak, with comments and likes barely reaching double digits. He is no longer a top-tier entrepreneur who was enthusiastically praised by major magazines and companies.

Make a change and invest in Bitcoin

On August 6, 2020, MicroStrategy suddenly announced that it would make adjustments to fiscal reserves: it plans to invest $250 million in “alternative investments or assets.” This alternative asset includes Bitcoin.

The word must do. Less than a week after the news broke, on August 11, MicroStrategy stated that the company had purchased $250 million worth of bitcoin. Interestingly, after the news was sent, MicroStrategy’s stock price also rose slightly, from $124 to $137.

On September 15th, Seiler confirmed that MicroStrategy had completed the acquisition of 16,796 BTC again the day before (September 14), valued at $175 million. From September 15th to 16th, Microstrategy’s stock price rose for two consecutive days, reaching a maximum of $174.9, reaching the highest price since July 2017.

A public company that spent $400 million to purchase Bitcoin, revealing the two purchases of MicroStrategy, cost a total of about $400 million. The reason why MicroStrategy invested in Bitcoin is also very simple. They believe that Bitcoin is a “reliable store of value” that is “better than cash.”

What Seiler ultimately wants in investment is to either lose half of the investment or increase it by 10 times. This investment philosophy is somewhat similar to buying Amazon or Apple stocks in 2012. Also commonly known as asymmetric risk.

Seiler observed that in the past decade, one of the winning strategies in the investment field has been to find a “digital-led network.” For example, Apple digitized mobile communications. Amazon digitizes business. Google digitized the process of collecting information.

Thaler, who is good at thinking, found that all the opportunities that can rise 10 times have in common, that is:

1. Has achieved a market value of more than 100 billion US dollars;

2. When the scale is ten times that of the next biggest competitor.

Looking at the market, Bitcoin is the perfect choice. Bitcoin is the currency of the dominant digital network, and its scale is more than 10 times that of any cryptocurrency that wants to be a store of value (excluding ETH), so Bitcoin happens to meet Thaler’s investment requirements.

We don’t know if this is the latest move by MicroStrategy founder Thaler to “change the world”.

But such a big deal has indeed successfully attracted the attention of the crypto community. Whether MicroStrategy, which has been deposited for 20 years, is ready to rely on Bitcoin to fight a beautiful turnaround is unknown.

Since the company announced a massive purchase of Bitcoin, MicroStrategyy founder Thaler immediately gained a group of crypto fans, and industry leaders have also followed his account for interaction, including FTX co-founders SBF and Morgan Creek Digital Co-founder Anthony Pompliano, Multicoin Capital executive director Mable Jiang, Block.on co-founder Brendan Blumer (BB), etc., the amount of tweet interaction has also increased significantly.

The magic of Bitcoin’s consensus has begun to take effect on Thaler. He himself has publicly praised on Twitter that “Bitcoin feeds on the fire of truth. With the support of the crypto field, it grows exponentially, becoming smarter, faster, More powerful.”

The public company that spent $400 million to purchase Bitcoin reveals that MicroStrategy MicroStrategy and its founder Thaler’s recognition of Bitcoin is just a microcosm of the penetration of the crypto market into the traditional market. Since 2019, several traditional market companies have announced cooperation with crypto companies and even directly purchased Bitcoin as asset allocation.

However, according to the development of MicroStrategy in the past 20 years, there are also many skeptics who believe that MicroStrategy is “scratching hot spots.” After all, since the Internet bubble burst, MicroStrategy’s stock price has been on a downward trend, and just after the company announced its investment in Bitcoin, the stock price has risen abnormally. This company, which has been unknown in the traditional market for many years, suddenly made headlines again. Its founder Thaler’s Twitter account has also changed from a small blogger with only a few dozen replies and likes to 160,000 fans , A Twitter big V with over a thousand comments.

Before most mainstream views focused on the promotion and assistance of traditional enterprises to the encryption market, but now it may be time to think in the opposite direction. Is it because traditional market companies have brought more economic benefits and potential to the cryptocurrency market, or has the crypto market activated those established companies?

Disclaimer:

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