Michael Saylor, the chief executive of business intelligence software company MicroStrategy, believes deeply in Bitcoin and has asked other companies to transfer their corporate money to the cryptocurrency. That’s what MicroStrategy has done, in a bigger way than the others that put Bitcoin on their balance sheets, reports the DealBook newsletter.
On Wednesday, MicroStrategy announced a $ 1 billion Bitcoin purchase, bringing its total cryptocurrency spending to more than $ 2 billion since the summer. MicroStrategy “remains focused on two corporate strategies,” said Saylor in a statement: expand its software business and “acquire and maintain Bitcoin”. The company’s chief financial officer, Phong Le, said that investments in Bitcoin complemented the software business “by increasing awareness of our brand and offering opportunities to secure new customers.”
The price of Bitcoin is currently double the average cost MicroStrategy paid for them, resulting in a gain of almost $ 2.5 billion. Before starting to buy Bitcoin in August, MicroStrategy’s market capitalization was just over $ 1 billion. Now it’s almost $ 8 billion, with its Bitcoin stakes overshadowing its software business.
“It’s amazing that a board of directors has allowed this,” said Marc Lichtenfeld, a financial advisor, citing Bitcoin’s extreme volatility and its tenuous link to the company’s software business. Buying cryptography in bulk as a marketing tool will not affect MicroStrategy’s fundamental business prospects, increasing its earnings and cash flow, he noted.
“Regulators may be concerned,” said Richard Levin, fintech attorney at Nelson Mullins. “Any publicly traded company that brings a digital asset to its balance sheet should proceed with caution.” It is okay to buy an asset because it is rising, Levin said, but companies need to be careful to avoid looking like they are buying it to exaggerate.
MicroStrategy is not alone in acquiring Bitcoin. Payments company Square announced a $ 170 million purchase this week and Tesla bought $ 1.5 billion in Bitcoin earlier this month. But money is Square’s business, and Tesla’s purchase was a much smaller portion of its corporate cash, less than 10 percent (not about 1 percent, as previously reported here).
Companies that previously reoriented their business around cryptocurrency – in addition to just buying a lot, like MicroStrategy – have had problems with financial regulators in the past, like Overstock, the token retailer and supplier, and Long Blockchain, the renamed iced tea manufacturer that was removed from the list this week.