Food for thought - What’s intelligent about acquiring 153,000 BTC, with MicroStrategy making losses & taking on large amount of debt to acquire that Bitcoin??
MicroStrategy under Michael Saylor is a Corporate whale buyer of BTC
Just like there are certain famous personalities we despise in crypto, there are personalities we crypto enthusiasts admire. In the former category, we have Justin Sun and in the latter we have Michael Saylor.
We all know Michael Saylor, the executive chairman of MicroStrategy, as he keeps making news with MicroStrategy buying BTC.
Michael Saylor who was the CEO of MicroStrategy for 30 years, stepped down from the post just to focus on MicroStrategy’s BTC acquisition strategy & BTC advocacy initiatives.
Under Saylor, MicroStrategy has acquired and currently holds close to 153,000 BTC, making MicroStrategy, a public trading corporate that’s the largest holder of BTC!!
MicroStrategy was also the first public trading company to purchase BTC on August 2000, when 250$ million worth of BTC was purchased.
Very recently on June 2023, Michael Saylor made news with MicroStratergy buying 12,333 BTC spending $347 million.
Understandable why many crypto enthusiasts are avid fans of Michael Saylor!!
All right, we get it why crypto enthusiasts like Michael Saylor because he portrays himself as a hardcore Bitcoin believer.
Yes, he has given solid reasons for his bullishness on BTC, from BTC being a hedge against inflation, to it being the top performing asset class in the recent decade delivering higher returns than other asset classes.
Check out the educational resource section on Bitcoin put out on MicroStratergy’s website>>
Heck, Michael, has even taken BTC that he associates as digital gold as MicroStratergy’s primary treasury reserve.
Fans need to realise that MicroStratergy’s actual business is not Bitcoin
Yup, all this gels with our believe systems, yet there is another side to MicroStratergy, it is after all not a BTC company but a company that offers business intelligence analytics software solutions.
So, you should not buy shares of MicroStratergy, MSTR because it’s the public trading company holding the largest stash of BTC.
Logically investing is done evaluating the performance of the company’s business activities and financials.
When a company makes good profits, it’s share maybe a good buy as there are other metrics and fundamentals that have to be evaluated before buying a share.
Michael Saylor seems to have won share buyers with his huge BTC buy publicities!!
Investors have been blindly purchasing MSTR as it holds a large BTC stash!!
Now, it appears that investors have been purchasing MSTR, not evaluating MicroStratergy’s business performance but with the mindset that MSTR’s performance is related to BTC!!
Just watch, the price action of MSTR tangoing with the price patterns of BTC.
Source. MSTR share price performence co-related to BTC's performence than MicroStratergy's
So from August 2020 till Feb 2021 MSTR's share rose from 143$ to 1,372$.
During that same time period BTC’s price went up from 11,000$ to 59,000$.
However, during this period MicroStratergy’s business was not making profits or generating earnings to justify appreciation of MSTR’s share price. Sounds bizarre? let’s dive into MSTR financials!!
MSTR share prices shot up during a period when it was making losses!!
MicroStratergy's Declining and negative Net income and profits since 2019
Tradingview provided data on MicroStratergy's financials
On 2020, MSTR made a net income of -7.52M, on 2021 MSTR made a Net income of -535.48M.
MicroStratergy’s Earnings for each of the share issued has been negative
MSTR’s EPS or Basic earnings per share which is the measure of the company’s earnings per share issued is -0.78$ on 2020 and -53.44$ on 2021. This means that MicroStratergy’s earnings for each of the share that’s issued is negative!!
Obviously, in this case MSTR’s share price performance during the August 2020 – Febuary 2021 period is not indicative of MicroStratergy’s actual business performance and earnings!!
How is Michael getting money for MicroStratergy’s large BTC purchases?
So, one wonders when MicroStratergy is not making profits to have any extra cash to invest on BTC, how is the company getting money for it’s BTC investment activities?
Since 2019, MicroStratergy is taking on debt – on 2020 Long term debt amount is 570.69$ million and for 2021 it’s 2.23$ billion.
(Important to note that this is Long term debt so it’s taken for a longer period of time than 1 year atleast. So, MicroStratergy has no immediate obligations to pay off his debtors.)
Worrying that MicroStratergy has a large debt quotient
MicroStratergy’s sudden spike in debt quotient is a worry
MicroStratergy has suddenly in the recent years taken on more debt than the cash it generates through it’s business operations.
Right now, MicroStratergy has more liabilities than assets, so it’s doubthful, if the company has enough resources to pay off its debt currently.
MicroStratergy’s Net debt for 2020 was 520.75$ M, for 2021 it was 2.18$ B & for 2022 it’s grown further to 2.41$ B. Net Debt, shows the amount of debt that remains after the company pays off as much debt as possible with its liquid assets.
It appears Michael Saylor is betting big on BTC’s price to go up in future. However, should he not be more focused on making MicroStratergy profitable again, instead!!
Source. MicroStratergy has a dedicated Bitcoin education resource page at its website.
MicroStratergy buying BTC, taking on debt when the company’s earnings are not profitable!!
Well, I am not a fan of Michael Saylor, knowing this because he is insane if he has MicroStratergy buy loads of BTC taking debt, when the company is not generating enough earnings for the company’s shareholders holding MSTR to reap profits.
Infact, MicroStratergy’s financial performance is reaping losses for its share holders and investors!!
BTC luck for MSTR’s share price not likely to play for now!!
Although, MSTR share price performed well when BTC had its bull cycle during August 2020- Nov 2021 period, inspite of MicroStratergy’s business making losses, things have changed now.
This is because BTC seems to be in a bear cycle that has failed to break resistance at $30,000 & has fallen further to $25,000 price levels at the time of writing this article.
Add to this MicroStratergy’s business performance not making profits will not hold good for its shareholders, especially since MicroStratergy has recently acquired a high debt quotient all to fund its grand BTC acquisition activities that's made news!!
Michael, take a break from BTC now & focus on improving MicroStratergy’s earnings now!!
Let’s see if Michael Saylor, manages the needed affairs well, perhaps focus would go on improving MicroStratergy’s earnings, that would automatically lift MSTR's price up organically for shareholders.
Then in the long term when BTC's price too appreciates, MSTR's share price deservingly would also appreciate.
Michael should be careful about aspects like taking on debt, buying BTC now as it may only increase MicroStratergy’s liabilities which are already more than its assets.
It would be better as mentioned before if Michael focuses on improving MicroStratergy’s earnings and profitability than focus on gaining publicity through his BTC purchases for MicroStratergy and publicize his excellent views on BTC.
Thankyou for reading!!
