‘Cash Is Trash,’ So Let’s Bet $425M on Bitcoin
wsj.com
wsj.com
This doesn't make sense for a number of reasons. Firstly: The company has no competitive advantage buying bitcoin. If investors in this company wanted to buy bitcoin there's no reason not to just pay a dividend and let the investors buy bitcoin.
Secondly, investors can now no longer invest in MicroStrategy - since the value of your investment in MSTR is now 2/3rd determined by the performance of MSTR, and 1/3rd determined by the performance of bitcoin. Essentially attaching a hugely risky bet on bitcoin to a business analytics company.
Thirdly, even if you do buy their contention that USD is going to go to 0 (which is a wild contention) there are other assets you would buy. Commodoties, Foreign currencies, real estate - hell even Treasury Inflation-Protected bonds would all form part of your portfolio.
Fourthly, you're signing yourself up for this enormous risk of owning bitcoin. You've essentially put a $400m target on your back saying "If you can compromise our security, you could have half a billion dollars!". Now obviously security is important in all asset ownership, but most assets have far more reputable people willing to offer services to secure your possessions (like a bank).
On the other hand though this does make it nice and easy for the CEO to disappear off with half a billion of his investors money in his back pocket. I'm sure glad those investors are in safe hands though - this would be really suspicious if the CEO had previously had to settle accounting fraud charges.
They were able to secure Bitcoin from an OTC desk, at a discount relative to what retail investors pay. You're essentially able to secure the BTC without effecting markets, with this size of purchase it's highly advantageous.
MSTR very loudly announced their strategy which was quickly followed by other public companies. (bitcointreasuries.org) Although this type of strategy has been adopted before, the FOMO has really started kick off.
This is fundamentally not any different than APPL holding cash, although I'd question the ever decreasing value of USD relative to BTC.
Totally agree, and this line from the article jumped out at me. So -- during a giant tech boom -- the company was unable to grow revenues...and now it is pivoting to a pseudo-asset management company with a singular bet on BTC?
As a shareholder, why would I want this? If I need BTC exposure, I can buy BTC directly, I dont need it co-mingled with a software firm.
How does the board allow this to happen?
It's a super incestuous club that basically prevents you from losing money
This is the real question. I wish we could have a transcript of the discussion between treasury staff and the board on why it was a good idea to tie up cash in this way.
I love that we live in a world excess income by a company is just expected to go to buybacks and not towards expanding operations and R&D.
If the money is returned to shareholders, they are now free to deploy the capital how they see fit. This could be for personal consumption, investing in new companies or funding R&D. All of these are positive outcomes for society at large.
But I fail to see what positives can come from putting $425MM into a volatile and mostly speculative digital asset.
It's only recently that companies have decided that pursuing endless (and often pointless, see Google) expansion is better than paying dividends, and generally this behavior is mostly tech companies.
Dividends were very common pre-1980. What makes you think they weren't?
> I think stock is supposed to be like gold, you invest in the value of gold.
The value of a stock comes from the possibility of capital return from the company. If the company never gives anything to shareholders, the value of a stock is no more than the paper it's printed on.
Dividends were often a very small piece of a companies expenses, just to incentivize long term holding of shares, not short term seeking of profits