The Trojan Horse

MicroStrategy has been accelerating their plan to sell equity and debt in exchange for Bitcoin as more and more companies jump on the bandwagon. Have they created a financial Trojan Horse?

On August 11th, 2020, Michael Saylor announced his firm would be buying $250M of bitcoin using their excess cash. This followed an announcement from the board on July 28th that the company was looking to invest in Bitcoin as an inflation hedge and as a superior store of value from their rapidly devaluing fiat currency. A short time after, he began going on Bitcoin podcasts such as What is Money hosted by Robert Breedlove, doing multiple 90 minute discussions on the history of money, economics and how bitcoin can revolutionize economies.

He referred to Bitcoin as a “reliable store of value and a compelling investment asset, offering massive long-term growth potential compared to holding cash”- something that caught the eye of Wall Street analysts and C-suite executives alike. In the process, he generated a cult retail following, much like Elon Musk of Tesla and Ryan Cohen of Gamestop.

Saylor had made history as the first leader of a mainstream public company to endorse the orange coin as a corporate investment. Then, on September 15, 2020, he reinforced his commitment by allocating an additional $175 million, bringing MicroStrategy's total investment to $425 million for 38,250 BTC.

With his cash hoard drying up, Saylor initiated a new strategy, opting to sell convertible debt. This offering was the first of its kind, selling credit instruments to buy Bitcoin. Here’s a visualized timeline of their purchases from Kucoin:

December 2020: MicroStrategy accelerated its Bitcoin investment, purchasing 29,646 BTC at an average price of approximately $22,000 per bitcoin. This $650 million acquisition was funded through a convertible senior note offering designed to raise capital for additional Bitcoin purchases.

2021: On June 21, MicroStrategy made a significant buy, acquiring 13,005 BTC for about $489 million, at an average price of roughly $37,617 per bitcoin.

2022: Between November 1 and December 21, the company purchased 2,395 BTC at an average price of $17,871 each. Notably, it also sold 704 BTC in December when Bitcoin was trading around $17,800.

2023: From March 27 to April 5, MicroStrategy acquired 6,455 BTC at an average price of $28,016. The company continued its aggressive strategy, adding 12,333 BTC between April and June at an average of $28,136 each. By July, another 467 BTC were acquired at an average price of $30,835.

February 2024: The company purchased 3,000 BTC between February 15 and 25 at an average price of $51,813 per bitcoin.

March 2024: MicroStrategy acquired 12,000 BTC for $821 million, averaging $68,400 per bitcoin.

MicroStrategy’s story begins in 1989 when Michael J. Saylor, Sanju Bansal, and Thomas Spahr founded the company in Delaware. Fresh out of MIT, where he studied aeronautics and astronautics, Saylor’s perspective shifted during his time at DuPont. He realised that data analytics could fundamentally transform how businesses operate. His drive to act on this insight laid the foundation for MicroStrategy. Starting with consulting gigs for companies like McDonald’s, the trio helped organisations optimise their operations by interpreting complex data. However, Saylor quickly pivoted from consulting to software development, recognising that software offered global scalability in a way consulting could not.

By 1992, MicroStrategy secured its first major client, propelling its reputation as a pioneer in business intelligence (BI). In 1995, it launched its first flagship software, offering scalable tools for data reporting and visualisation. The product resonated with businesses drowning in data but desperate for clarity. The company’s innovations stood out for their ability to customize and scale to meet client needs.

The 1998 IPO marked a turning point. Raising $125 million and listing under the ticker MSTR on NASDAQ, MicroStrategy became a darling of Wall Street. Investors saw the company as a leader in the emerging data analytics space, and the stock soared as optimism around tech companies grew. However, this era of rapid growth also had its pitfalls.

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Now let’s get back to it!

The dot-com bubble was marked by a period of irrational exuberance, where speculation ran wild and market participants were swept up in an unsustainable frenzy. Companies, including MicroStrategy, found themselves caught in this chaotic environment. In Zero to One, Peter Thiel vividly illustrates the mania of the time, recounting bizarre instances where waiters and waitresses would be offered high-flying tech stocks as payment for meals. Even more absurdly, these stocks were often eagerly accepted.

In March 2000, MicroStrategy faced an accounting scandal when it was revealed that the company had prematurely recognised revenue for three consecutive years. This revelation shook investor confidence, and the company’s stock plunged from $333 to under $10, wiping out billions in market value overnight. Reflecting on the crisis in a 2012 interview with Charlie Rose, Saylor noted, “When the bubble burst... many companies threw in the towel... but it caused us to refocus on our basic principles.”

During the process of rebuilding, Saylor established himself as a thought leader with the release of The Mobile Wave in 2012. The book correctly forecasted the transformative impact of mobile technology on global business and society. In interviews promoting his book, Saylor firmly asserted his belief in the transformative power of mobile technology, remarking, “There isn’t an 8-year-old on the planet who doesn’t want an iPhone 5.” He further solidified his stance with a playful jab, adding, “Anyone selling that stock must be a moron.”

However, now it appears that MSTR 0.00%↑ has created a financial Trojan Horse, a trap for the fiat system that aims to siphon as much monetary energy out of tradfi as possible. Let’s dive in: