MicroStrategy’s founder and Chairman, Michael Saylor, has experienced considerable fluctuations over the last 25 years. The dotcom bubble burst in 2000 wiped out 99% of the company’s stock value. In 2022, Bitcoin, a crucial component of MicroStrategy’s balance sheet, plummeted by more than 70% from its all-time high in November.
However, by March 2024, MicroStrategy’s stock (MSTR) surged by a remarkable 461.7% over the previous year. Despite the tumultuous events, MicroStrategy has proven to be a success story for its investors.
Who are the owners of MicroStrategy?
MicroStrategy Inc. is a company that specializes in enterprise analytics and mobility software. Its offerings include the MicroStrategy Analytics platform and MicroStrategy Server. The company earns revenue from various sources, such as licensing agreements, cloud-based subscriptions, and related services connected to its platform.
Michael Saylor, MicroStrategy’s founder and executive chairman, is the company’s largest shareholder. He holds Class B shares valued at over $2 billion, giving him 68% control over the company’s voting power. The second and third largest shareholders are Capital Research and Management Company and The Vanguard Group, Inc., respectively.
While Saylor sold 400,000 voting shares between December and April, his overall stake and control over the company’s voting rights remain largely unchanged.
Big bet
Saylor’s strategy as MicroStrategy’s chairman focuses on tapping into low-cost debt to generate substantial capital. Given that interest rates are below 1% per year, the company gains access to affordable funding, enabling it to make impactful investments.
MicroStrategy uses an innovative approach to debt repayment by offering its own stock (MSTR) instead of cash. This method provides lenders with a premium over the stock’s price at issuance, creating a win-win situation for both the company and its lenders by aligning their interests.
In 2020, Saylor made a pivotal decision to safeguard against currency debasement by investing MicroStrategy’s surplus cash into Bitcoin. Around this time, MicroStrategy raised $3.4 billion through various financial instruments to acquire Bitcoin, leading to a total investment of $4 billion in the cryptocurrency at rising prices.
The concept behind this strategy is that MicroStrategy could repay its fiat debt in the future by selling less Bitcoin, counting on Bitcoin’s potential to act as a store of value with significant long-term capital appreciation. In an October 2020 tweet, Saylor disclosed that he personally held 17,732 BTC valued at $250 million. It’s likely that he’s increased his Bitcoin holdings since then.
Long-Term Strategy
Over the past four years, MicroStrategy has acquired 214,246 BTC, representing approximately 1.02% of the total Bitcoin supply. The company’s latest buying spree began in late December 2023, just before the start of the most recent bull run.
According to filings with the U.S. Securities and Exchange Commission (SEC), between February 15 and 25, MicroStrategy invested $155.4 million to acquire 3,000 BTC. An additional 9,000 tokens were purchased for $623 million in convertible notes between March 11 and March 18. Overall, in 2024, MicroStrategy spent nearly a quarter of its total Bitcoin purchases, with an average cost more than double that of the previous year’s average, as reported by Bloomberg.
Today, MicroStrategy owns 214,246 BTC, valued at over $14 billion, which is about 1% of the total circulating supply of Bitcoin. The software company has been the largest Bitcoin holder among public companies for quite some time. However, BlackRock recently surpassed MicroStrategy’s holdings through its iShares Bitcoin ETF (IBIT).
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BlackRock and Fidelity have recently disclosed that they collectively hold 428,304 BTC worth $27.7 billion through their spot Bitcoin ETFs. This total exceeds MicroStrategy’s Bitcoin holdings by 214,058 BTC.
MicroStrategy’s strategy of buying Bitcoin and holding it on its balance sheet raises questions about its long-term efficacy. The company’s average purchase price for Bitcoin is $31,554 per BTC, resulting in a current market value exceeding $13 billion, signifying a considerable return on investment.
Bitcoin’s price has risen dramatically since April 2019, jumping from $5,170 to about $66,500. Over the past five years, MicroStrategy’s stock (MSTR) has shown remarkable returns of 910%, far outpacing broader market indices.
Despite a recent pullback, MicroStrategy’s stock has increased by over 90% in 2024 after experiencing a stunning 346% surge in 2023.
However, the stock price’s growth doesn’t reflect MicroStrategy’s core business performance. In 2023, MicroStrategy’s revenue totaled nearly $496 million, but its operating income was only $800,000, down from $11 million in 2022. This indicates that the company’s stock value is more influenced by its Bitcoin holdings and the broader crypto market than by its enterprise software business.
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Ultimately, investors appreciate any business model that proves successful. Michael Saylor’s innovative approach to incorporating Bitcoin into MicroStrategy’s corporate treasury has not only positioned the company for long-term success but also set an example for other businesses to emulate. This strategy has showcased Bitcoin’s potential as a store of value, encouraging a wider adoption across the corporate sector.