My goodness – Microstrategy adopts a treasury policy where half of their cash ($250 million) is invested in bitcoin:
MicroStrategy® Incorporated (Nasdaq: MSTR), the largest independent publicly-traded business intelligence company, today announced that it has purchased 21,454 bitcoins at an aggregate purchase price of $250 million, inclusive of fees and expenses. The purchase of Bitcoin cryptocurrency was made pursuant to the two-pronged capital allocation strategy previously announced by the company when it released its second quarter 2020 financial results on July 28, 2020.
The company addressed the first prong, which called for returning a portion of its excess cash to shareholders, when it announced today that it had launched a cash tender offer for up to $250 million of MicroStrategy’s class A common stock via a modified Dutch Auction offer. By acquiring 21,454 bitcoins, MicroStrategy addressed the other prong of its capital allocation strategy, which called for investing up to $250 million in one or more alternative investments or assets.
This is the first instance I can think of a company that doesn’t specialize in the field (i.e. an ETF dedicated towards purchasing bitcoins or mining them) that has thrown bulk quantities of cash into Bitcoin.
What’s even more amazing is that their stock went up about 10% on this news (in conjunction with the Dutch Auction Tender they proposed on the same day). I’m guessing the bulk of it was due to the dutch auction rather than the bitcoin acquisition, but who knows?
Will other companies follow suit and diversify their US cash holdings into alternative assets? If so, things will get quite interesting – and will likely inflate the price of Bitcoin. I also don’t know if this had anything to do with the huge drop in gold today, but I also note that long-term US bond interest rates took quite a leap as well. Interesting times we live in.
Finally, if you feel like you are missing out, take solace that the best store of value historically has been in ownership of competently managed businesses that will continue to produce goods or services that will be in demand for the foreseeable future.